Gen Xers Still Falling Short of Retirement Savings Expectations

Americans in Generation X are facing the largest retirement savings gap of all current generations, and many say they have not yet done any retirement planning, according to a new research study from Schroder Investment Management Ltd., a subsidiary of Schroders PLC. 

Non-retired Americans between the ages of 43 and 58 (Gen X) estimate that, on average, it will take $1,112,183 in savings to retire comfortably, yet they expect to have just $661,013 saved, the Schroders 2023 U.S. Retirement Survey found. The resulting savings gap of $451,170 topped the expected shortfall facing Millennials and Baby Boomers. 

Deb Boyden, Schroders’ head of U.S. defined contribution, says Gen X is the first generation relying mainly on 401(k) and other defined contribution plans in retirement, as opposed to pensions. Consequently, many of these investors did not have access early in their careers to plan features that have become more widespread in recent years. 

“They missed the automation features such as auto-enrollment, auto-escalation, default QDIAs and target-date funds that really allow for individuals to have that automation and increase their savings over time without really thinking about it,” Boyden says. “So it’s no surprise that 61% of non-retired Gen Xers are not confident in their ability to achieve their dream retirement.” 

According to Schroders, 45% of non-retired Gen Xers also said they have not done any retirement planning, compared to 43% of Millennials and 30% of Baby Boomers.  

In addition, Schroders found that Gen Xers are allocating an average of 32% of their retirement assets to cash, despite their time horizon and sizeable retirement savings gap. When asked why they are investing their retirement assets in cash, about 63% of Gen Xers said they fear losing their money, and nearly one-quarter (24%) reported they are not sure how to best invest their savings. 

Boyden says the lack of automation also affected these results, as many Gen Xers missed out on being defaulted into TDFs that offer more investment diversification. Boyden adds that Gen X is a more “skeptical generation,” and if people in that cohort are taking their retirement savings into their own hands, they may believe cash is a more secure way to save.  

“What we can do to help with that, as plan sponsors or advisers, is to educate [employees] about diversification in retirement allocations,” Boyden says. “Each generation comes with a different way of thinking, so we really want to identify those specific cohorts and provide specific education … that is going to resonate with them.” 

Gen Xers are also preparing to make do with less support from Social Security in retirement. According to the survey, 11% of non-retired Gen Xers said they will wait until age 70 to file for Social Security, thereby receiving their maximum benefit payments, while 47% reporting being concerned Social Security may run out of money. 

“It’s really a crisis of confidence across the board,” Boyden says. “Either individuals are going to take [Social Security] as soon as they can, which means they would forgo the full benefits of waiting to take Social Security until age 70, or they’re going to work longer and put off taking Social Security until later.” 

Besides ensuring their assets are invested in a diversified portfolio, Boyden says Gen Xers should be taking full advantage of their employer’s match in order to build their nest egg and ultimately get closer to those retirement goals. 

She adds that the lack of retirement confidence across generations underscores the need for more in-plan products that help employees in retirement. 

“That’s something that the industry has talked a lot about, but we really haven’t seen adoption quite yet,” Boyden says. “We think with [Gen X and Baby Boomers] merging into retirement, it’s important to have … that safety net in decumulation as well.”  

The Schroders survey was conducted from February 13 through March 3 by 8 Acre Perspective among 2,000 U.S. investors between the ages of 27 and 79.