Baby Boomers and Millennials are the two age groups most frequently considered by retirement industry research, but an increasing number of experts have stressed that Generation X, also called the “sandwich” generation, should be analyzed on its own.
The generation, often described as those born between 1965 and roughly 1980, established their careers during a period of serious global reform, both politically and economically. Investors in Generation X faced down both the Internet market crash of the early 2000s and the credit crisis of 2008 relatively early in their careers—leading many to hold off on saving.
“Gen Xers have really kind of been on their own to do it themselves,” says Catherine Collinson, president of Transamerica Center for Retirement Studies (TCRS). “They were, in many ways, at the bleeding edge of the use of 401(k)s and of personal retirement savings responsibility.”
While the financial crisis occurred almost 10 years ago, challenges still linger for Gen Xers. According to the 2016 report by TCRS “Perspectives on Retirement: Baby Boomers, Generation X and Millennials,” 41% of Gen Xers say they have only “somewhat recovered” from the recession, while 14% have not yet recovered, and 8% believe recovery will never happen.
“It definitely is a generation that was squeezed the most over the past 15 years,” agrees George Walper, president of Spectrem Group.
With such challenges looming, it is no wonder that Gen X workers express less interest in plan participation compared with the older and younger generations. A study released by Spectrem Group found that Gen Xers are the least involved in active saving/investment participation of any other generation. Additionally, a study conducted by the Insured Retirement Institute (IRI) reported that about eight in 10 Gen Xers believe they are either somewhat or not very knowledgeable about investing, and two-thirds rate their financial IQ as average or low.
Collinson notes that Gen Xers should be looking at saving more than 10% to 15% of annual salary. That may be tough, as the median annual contribution rate for this group has been much lower than that over the past several years.
“The median annual salary contribution is only 7%, which tells us that many are likely not saving enough,” she says. “Of the three generations, they’re also the least likely to be saving more than 10%.”
To combat these challenges and the knowledge deficit, Collinson encourages plan sponsors and advisers to emphasize meeting the needs of Gen Xers in specific life phases. Organizing educational campaigns is a good place to start.
“One of the most important things they can do,” says Collinson, “is simply decide to make a concerted effort to focus on Gen X: knowing that they’re between ages 39 and 52, building out communication and education campaigns catered to the life phase they’re already in right now.”