Step Aside Baby Boomers: Gen X  Is Starting to Retire

December 20, 2022 –  There is a new crush of retirees coming to town, and they are not Baby Boomers. Generation X, those born from 1965 to 1980, are finally getting their turn in the retirement spotlight, a very big demographic shift in the making. The eldest GenX-ers will turn 58 in 2023, the age when many people start retiring in earnest. But how ready for retirement will this new generation be, and how will it differ from the baby boomers before them?

Confident?

Fortunately, many in the Gen X generation have been preparing for retirement.  Most have been saving for that day, confident about their money skills, but worried that they might fall short of what it takes to maintain their working day lifestyles. Of course, either from choice or necessity, not all of they will retire early, or ever.

A multi-generational financial literacy study from Investopedia found that Gen Xers do have their share of worries. Chief among those are what is going to happen with Social Security, cryptocurrency fears, and the state of their savings and investments. A little over half (55%) expect to be able to retire, but one in four are not so sure. When it comes to Social Security, there is a great deal of skepticism from this younger generation. They know that the SS Trust Funds will be exhausted in a little more than 10 years, before the youngest of this demographic will even be eligible to claim. Although boomers tend to think that Congress will act to prevent cuts of 30% or more in benefits, Gen X is not counting on it.

When will they retire?

While the average retirement age can fluctuate depending on which state you live in, the average American man retires at 64.6 years old and the average American woman retires at 62.3 years old (Center for Retirement Research). According to Market Watch, 38% of GenX say they expect to retire at age 70 or older, or do not plan to retire at all. Investopedia found that Gen X plans on retiring at about age 64, but many plan to work in retirement. Gen Z and millennials say they plan on retiring even earlier than Gen X. These stats are not that dissimilar from what baby boomers said about their retirement plans, although in practice most people almost always seem to retire before they plan to, for a variety of reasons.

Where will the money come from – crypto?

Like previous generations, retirement income will mostly be a 3 legged stool, with Social Security, 401k,  and pensions as top sources. Gen X also has stock market and mutual fund investments. A sizable number are counting on cryptocurrency as an important source, although they could well be worri3d about the recent crypto scandals and bankruptcies.

One source that will not be nearly as important for this new generation of retirees is a pension. Compared to 54% of early boomers who expected pension (defined benefit) income, only 34% of Gen X see that as fueling their retirements.

How does GenX compare to boomers and later generations – Gen Y and Millennials?

Gen X is definitely worried  about their financial status. One survey found that only 54%  feel their financially retirement is secure—the lowest of any generational group. They report a lack of financial security that is more similar to Millennials. The problem is that for Gen X, retirement is just about here, so they have a lot less time to save and prepare. Compared to baby boomers, they are much less likely to have a pensions to provide a comfortable source of retirement income.  

As for how much they have saved, 22% of Gen Xers have over half a million dollars in their savings and investments. But a quarter have less than $10,000, similar to what Millennials have accumulated. Like the generations behind them, they have been battered by some huge market forces during their careers. There was the dot com boom and bust while they were in their 30s, followed by the real estate crash and recession of 2008, and then the pandemic during their peak earning years. These factors, combined with high levels of student loan debt, have prevented many of them from achieving the savings and investment goals that their parents had. Instead, many are looking to a retirement without the money for a comfortable lifestyle, or having to continue their working careers. 

The time is now

Gen Xer John Stoj, founder of financial investment advisory Verbatim Financial pointed out in Investopedia that: “Gen X is in the home stretch. It’s time to get real, take an honest look at retirement savings, current spending, and how long you can still work. For Gen X, that time is now.”

Enough about money – what about retirement lifestyles?

it remains to be seen how Gen X will retire. Will they follow the same patterns as baby boomers, many of whom flocked to active adult and 55+ communities, or continued to live in their suburban homes? A diverse variety of retirements have cropped up in the last 40 years – ranging from the traditional to cohousing, new urban developments, city or college town retirements, etc. Our crystal ball sees all of those lifestyles remaining popular, but with many new and creative ways to retire cropping up too. Expect many Gen Xers to go for the unusual, like retiring to a surfing community abroad, or life on the road in a RV or converted van. 

If you are part of Gen X, we would love to hear what your plans are. Will you choose a familiar path, or go down a non-traditional road to retirement? Please share your thoughts in the Comments section below.

For those trying to keep this generational alphabet soup straight, here is a little chart:

Baby Boomers 1948-1964

Gen X 1965-1980

Millennials 1981-1996

Gen Z 1997-2012

Sources and further reading:

Gen X: All Eyes on Retirement