GEN X is Getting Ready to Retire

We’re almost to the finish line! Time flies when you’re having fun, right?

Almost all of the Gen Xers I speak to are done with the grind. We are in the midst of seeing parents through their sunset years and understand that time is precious. But we have unique challenges that generations prior to us did not have to deal with.

How did we get here?

Starting the late 1970s and 1980s, employers started shifting away from traditional pension plans to 401 K plans. Pensions required companies to pay out a guaranteed fixed income for the remainder of an employee's life, no matter how the stock market performed. People are living longer, which left corporations with a pricey, unpredictable long-term liability. Contributions to 401 K plans are much easier to manage and financially predictable. They are based on a flat formula, like a matching employee contribution percentage, or direct contributions to an employee’s account. The employer’s obligation to retirees is now finite and limited to whatever balance is in the account. You can see that this is great for the companies, not as great for the retirees.

Our generation was the first that had to rely on defined 401 K contribution plans. HR didn’t do much to educate us on the importance of saving for retirement. I remember being handed a brochure in 1992 during my first job that offered one, that’s it. Many of us did not begin to regularly contribute until years into our careers.

They are calling us ‘the sandwich generation’ as we may be financially helping out our aging parents and still raising our children which makes it difficult to set aside money for ourselves. Also, a majority of our working years have had wages not keeping up with the increased cost of living. This shortfall resulted in years of living paycheck to paycheck leaving little for rainy day funds let alone retirement. Add to that a series of unfortunate economic events: the dot bomb era in the early 2000s, the recession in 2008, followed by COVID.

But wait, it gets better. Social Security's primary retirement trust fund is projected to be depleted in 2032. When the fund is depleted, the program will not run out of money completely because it will still collect ongoing payroll taxes, but those incoming funds will only cover about 78% to 83% of scheduled benefits. If Congress takes no action before the deadline, beneficiaries across the country could face an automatic cut in their monthly payments. Fan-freaking-tastic.

If you have read this far, know that you are walking in good company. Approximately 40% of Gen X households have no retirement savings at all. At all. If you were able to save anything, the median balance across our entire generation is $40,000. The median balance for those of us that have a 401 k is $100,000, and 25.5% have a 401 K loan against that balance. For those of us that have yet to retire, about two-thirds have stopped saving or are keeping what retirement assets we have as cash and out of markets that can crash. It’s OK to have a pity party for a bit. Gen X has always gotten the short end of the stick, why should it be any different now?

Here’s some good news. Everyone has always underestimated us, and we have always found a way forward. We have seen so much change in our lifetimes that we are used to pivoting, learning, and forging ahead. Preparing for and entering retirement will be no different. We are gritty, resilient, hardworking, and content with the simple pleasures of life. We may be crafting our own DIY retirement, but we will be just fine.

The following series of posts on FAWA focus on retirement. When should you retire? Can you retire on Social Security alone? What is a DIY Retirement Plan? Disclaimer: I am not a professional retirement financial planner, you should never solely rely on anything you read on the Internet. I am simply a slightly salty fellow Gen Xer that is discussing retirement budgets and strategies that I find interesting. Always, always seek professional advice for yourself and your own families before making any big decisions.

If you are amongst the minority of Gen Xers that have been able to save the advised $1.4 million for retirement, I applaud you! You have found a niche, worked hard, and will be able to enjoy many comfortable years with those you love. Unfortunately, the rest of the articles in this series may not be applicable or interesting to you.

For the rest of us, read on.