As Generation X gets closer to retirement, reality sets in, with over half of them saying they'll never retire, according to a Natixis Investment Managers poll

Highlights

Approximately 50% of Gen Xers in the United States acknowledge that they could need to work beyond their intended retirement age.

Few Gen Xers see investing risk as maintaining excessive amounts of cash despite dangers; most characterize it as exposure to volatility.

Although there is a growing need for human guidance, Gen Xers are the least likely to have access to qualified financial counselors.

June 18, 2024, Boston - Generation X has been disregarded for the most of the twenty-first century, trapped as they are between the younger, more inquisitive Millennials and the older, more well-liked Baby Boomers. Born between 1965 and 1980, the eldest generation xers will age 59 ½ in June, at which point they will be able to start taking penalty-free withdrawals from their retirement funds. In a recent poll conducted by Natixis Investment Managers (Natixis IM), over half (44%) of Gen Xers in the United States said that they would need a "miracle" in order to have a comfortable retirement. Although the majority of Gen Xers in the United States do want to retire at some point, almost a quarter (24%) believe they won't.

The study highlights a gap between Gen Xers' hopes and reality and presents a harsh image of their retirement. The survey states that Gen Xers aspire to retire at age 60, which is nine years younger than unretired US Baby Boomers' expected retirement age of 69. Compared to many retirees' real experiences, Gen Xers expect their retirement to last barely 20 years. The truth is that, despite having a typical family income of $150,000, this group of investors only has $250,000 in retirement savings as of right now, which is not enough to last them for 20 years.

"Gen Xers are the demographic Jan Brady." They've gone unnoticed despite being positioned between Millennials and Baby Boomers. According to Dave Goodsell, Executive Director of the Natixis Center for Investor Insights, "many people now find themselves caring for both aging parents and growing children while under pressure to fund their retirement." Although some concern is normal for investors in this "pre-retirement" stage, the survey's findings highlight the particular difficulties this generation faces as they think about their retirement strategies. Since self-sufficiency is ingrained in their DNA, the first latch-key kids took care of themselves, but maybe it's time to seek for assistance.

Retired and Feeling Alone

The road to retirement seems lonely for a lot of Generation Xers. In fact, rather than relying on public or private pensions, 73% of American Gen Xers think it is increasingly their duty to pay for their retirement. Because of this, many members of Generation X are getting ready to face the prospect of having to postpone or drastically modify their retirement plans: 

Notwithstanding their concerns that they may not be able to (because of forced retirements, layoffs, etc.), Gen Xers expect to need to work longer: Thirty percent fear they will have to work beyond retirement, while forty-six percent of American Gen Xers realize they could have to work longer. Thirty percent are concerned that their working hours may be shortened. 

Reduced benefits as a result of governmental debt is a serious issue: Seventy-five percent of Gen Xers in the United States fear that rising public debt would mean lower retirement benefits. Without benefits, 58% of people think it would be difficult to make ends meet.

According to Gen Xers, companies need to be doing more to assist staff members in saving for retirement: According to 75% of Gen Xers in America, more companies need to provide pensions rather than defined contribution plans. 

Gen X worries that their retirement funds would be destroyed by healthcare costs: A significant portion of American Gen Xers (34%) express concern about running out of money while attempting to pay for healthcare in retirement.

Getting Around in a Difficult Macroeconomic Environment

The macroeconomic scene in 2023 was characterized by a sharp contrast: while the Federal Reserve was fighting tooth and nail to contain inflation with historically high interest rates, the stock market was having one of its best years. In 2024, there has been a notable change in the inflation rate, however it has decreased and is still higher than the levels targeted by the Federal Reserve. In light of these circumstances, Generation X is having to face the reality of how quickly the economy and markets may affect their retirement plans:

Regarding their level of financial independence in retirement, Gen Xers are divided. Forty-six percent think they will have “the freedom to do what I want, when I want,” but forty-six percent also believe they will have to live frugally, and thirty percent are concerned they will have to relocate someplace less costly. 

Gen X is adjusting their spending and saving due to inflation: According to 83% of American Gen X investors, inflation has shown the extent to which prices pose a danger to retirement security. Approximately 62% of respondents said they are saving less as a result of increased daily expenses. Of these, 25% think that increased inflation has encouraged them to save more. 

In an attempt to catch up, Gen Xers could be going to the markets: Of American Gen Xers, over half (49%) say they don't mind taking chances to succeed. Nevertheless, 79% of respondents said they would still choose investment safety above performance if given the option. 

It's possible that Gen Xers are substituting short-term assets like bonds—which they find difficult to comprehend—with cash investments: Just 5% of Gen Xers think it's dangerous to have too much cash on hand. In actuality, cash investments may restrict long-term gains, are susceptible to inflation, and often yield lower post-maturity rates than bonds. Although less than half (43%) of Gen Xers invest in bonds, 44% of them said they were unsure of the answer, and just 2% of them gave the right response when asked how interest rates affect bonds.

Assisting Advisors in Meeting Retirement Requirements

Despite being seen as independent, a growing number of Gen Xers are understanding how crucial it is to depend on financial advisers for assistance in managing their retirement.

Although American Gen Xers say they use financial counselors less, inflation worries point to a change: In general, American Gen Xers show less need for expert financial guidance than Gen Xers worldwide; just 34% of American Gen Xers say they require professional financial advice, compared to 56% of Gen Xers worldwide. In the United States, Gen Xers used advisers less often (from 42% in 2019 to 39% in 2023) and relied less on automated counsel (28% in 2021 to 15% in 2023). Nevertheless, 61% of respondents said that expert advice is crucial for navigating the current inflation.

American Gen Xers seek for personal financial advisers that are approachable, assist in future planning, and have market knowledge. In stark contrast to the global trend, which shows that nearly half of Gen Xers worldwide (49%) prefer digital advice to in-person advice, up from just 35% in 2019, and especially from Asia, where the number who prefer digital has grown to 64% from 41%, 76% of Gen Xers like to communicate with advisors in person rather than receiving digital advice. The most significant aspects of the connection between American Gen Xers and their adviser, according to them, are having an advisor who provides guidance on financial planning (53%), is reachable (42%), listens to them (40%), and explains investing to them (39%). The latter is particularly crucial since, according to 49% of Gen Xers, they do not completely comprehend every investment in their retirement plan.

Liana Magner, Executive Vice President and Head of Retirement as well as Institutional in the US for Natixis Investment Managers, stated that "Gen Xers are at a critical juncture, grappling with addresses over the impact of high costs, market volatility, and dwindling benefits" amid the complexity of retirement planning. "It will be more crucial for them to use resources, such as financial advisors, to implement strategies that help them navigate retirement as they look for answers to these anxieties."