6 minute read
The spotlight often shines on Baby Boomers as they retire in record numbers - with around 11,000 turning 65 every day over the next few years.
But another generation is quietly facing its own challenges as they approach retirement.
I’m talking about Generation X (“Gen X”).
Understanding Gen X: The Latchkey Generation
Born between 1965 and 1980, Gen X earned the name “Latchkey Kids” as they grew up in a time when both parents were working (not just dad), divorce rates climbed, and inflation was soaring. Thus, they learned to fend for themselves early, growing independent by necessity.
And this is a sizable group. As of 2023, Gen X accounts for 19.9% of the U.S. population -around 65.2 million people1.
Figure 1: Statisa, Dunham January 2025
Meanwhile, the oldest Gen Xers turn 60 this year, meaning they can begin penalty-free withdrawals from retirement accounts. By 2027, at age 62, they’ll qualify for Social Security benefits.
But the data reveals they face some serious headwinds – such as:
- Savings Gaps: The typical Gen X household has saved just $40,000 for retirement.
- Debt Pressures: Many juggle mortgages, student loans (theirs or their children’s), and credit card balances.
- Pessimistic Outlook: Only 14% of Gen Xers believe they’ve saved enough for retirement.
Adding to these hurdles are fears of Social Security cuts and rising living costs. Together, these issues make Gen X one of the least confident generations when it comes to retirement.
Thus, it’s not a stretch to say that Gen X is staring down tough retirement challenges.
Here’s what they’re up against.
Gen X and the 401(k) Experiment
Gen X was the first generation to approach retirement without the safety net of traditional pensions.
See, before the 1980s, defined benefit pensions were the norm. Retirees received guaranteed incomes based on salary and years of service, while employers carried the financial risk, essentially funding their employees’ retirements. But with the rise of 401(k) plans in the late 1970s, this responsibility changed2. Workers now had to save more of their own money, with employers contributing only a small percentage.
Figure 2: Bloomberg, January 2025
And while this shift from pensions to 401(k)s gave workers a bit more control over their savings (and saved businesses money), it left them exposed to market swings and the risk of under-saving - marking a major change in retirement planning since the 1980s.
This greatly increased the sequence risk problem retirees face.
- Sequence risk is the danger of bad returns early in retirement. Combine that with withdrawals, and it can drain a portfolio and jeopardize retirement plans. Our EVP, Salvatore M. Capizzi, CEPA, explains itclearly and simply in this excellent piece (read here).
But the early days of 401(k)s were awkward, to say the least. Plans were bare-bones, and many companies didn’t offer them. They lacked basic features like automatic enrollment, savings escalation, and target-date funds. Gen Xers didn’t have access to these tools for years, losing out on valuable time to build wealth.
Adding to this challenge is increased market volatility since the 1980s. Thus, while 401(k) balances have grown alongside rising stock and property values, many Gen Xers remain pessimistic about their retirements, burdened by the risks and uncertainty this system has created.
A Confidence Gap in Retirement Savings
The numbers paint a bleak picture for Gen X:
- As mentioned above, the typical Gen X household with a retirement plan has saved just $40,000 - far short of what’s needed for a comfortable retirement3.
- And nearly 40% of Gen Xers haven’t saved anything for retirement.
Only 14% believe they’ve saved enough - leaving 86% worried about their future4.
Figure 3: Schroders (2023), Dunham January 2025
Worse, more than half (54%) of Gen Xers fear they’ll outlive their savings - higher than Boomers (40%) and Millennials (50%).
Gen Xers Are Working Longer and Looking to Claim Social Security Earlier
The result of this savings gap? Retirement will get pushed back as we’ve seen over the last several decades.
For instance, today, nearly 20% of Americans over 65 are still working. That’s almost double what it was 35 years ago. And Gen X is likely to follow this trend - working longer and retiring later.
But more worrisome is that Gen Xers may face social security cuts.
Just 10% of Gen Xers plan to wait until age 70 to claim Social Security, the age that would maximize payouts. Furthermore, 43% plan to claim these benefits early - fearing the program will run out of money - higher than 24% of Boomers and 37% of Millennials.
And who can blame them?
In May 2024, the Social Security Trustees5 Report showed that without legislative action, benefits could be reduced to 79% of scheduled amounts by 2033.
This would mean retirees would only get 79 cents on the dollar.
While it’s likely social security will be patched over, the long term structural issues within the system will require significant changes to stop the bleeding. And as it becomes more of a political issue, anxiety should keep rising.
Gen Xers and Financial Planning: Independence Over Advice
Maybe it’s in their “Latchkey” upbringing, but Gen Xers grew up valuing independence and self-reliance. And this mindset often keeps them from seeking financial help.
For example:
- Nearly 48% of Gen Xers haven’t started planning for retirement.
- Only 27% work with a financial advisor, trailing Boomers at 37% and Millennials at 31%.
To complicate matters further, nearly 25% of 55-year-olds are counting on financial support from their children - mostly Millennials and Gen Z. But here’s the kicker - many haven’t even had this conversation with their families yet, likely due to the discomfort it brings.
Thus, with many daunting issues plaguing Gen X, they may need to finally admit they need help. They shouldn’t fret as it’s not too late to turn the tide. But the clock is ticking.
How Financial Advisors Can Help Gen X
Advisors can play a crucial role in bridging the gap between where Gen Xers are and where they need to be. Key areas of focus include:
1. Closing the Retirement Gap
- Opportunity: Create tailored strategies to maximize savings, including catch-up contributions and smart investments.
- Why: With median savings at $40,000, many Gen Xers need help restructuring their retirement plans.
2. Managing Debt
- Opportunity: Help clients tackle mortgages, student loans (theirs or their children’s), and credit card debt.
- Why: Many Gen Xers are “sandwiched” between caring for aging parents and supporting children, leading to heavy debt burdens.
3. Guidance on Delayed Retirement Trends
- Opportunity: Provide advice on phased retirement, encore careers, and balancing work and leisure.
- Why: Many Gen Xers expect to work longer due to financial necessity, and they value strategies that help align this with their retirement goals.
Time is running out for Gen X to close their retirement gaps, reshape their financial stories, and get help over going it alone. Advisors, educators, and policymakers have a unique chance to help this generation rewrite their future.
Retirement isn’t just about survival - it’s about thriving. And the time to act is now.
Sources:
- S. population by generation 2023 | Statista
- Can I Afford to Retire? Gen X Trails Baby Boomers, Millennials in 401(k) Savings - Bloomberg
- The Forgotten Generation: Generation X Approaches Retirement - National Institute on Retirement Security
- Generation X and Retirement
- Social Security’s Financial Outlook: The 2024 Update in Perspective – Center for Retirement Research
Disclosures
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance. All examples are hypothetical and are for illustrative purposes only.
Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for information purposes only and should not be considered as investment advice.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.