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Generation X members expect to maintain their lifestyle in retirement, but they don’t have the savings necessary to make that happen.
According to a research brief by the Insured Retirement Institute, members of Generation X — those born between 1965 and 1980 — have low confidence that their savings will last throughout retirement, but they still think they will have enough income to be secure, including enough discretionary income for leisure activities.
“Gen Xers have a fundamental disconnect that is consistently observed in IRI and other consumer research focused on retirement income and expenses — namely, that the desire to maintain lifestyle leads to hopeful responses,” said Frank O’Connor, the IRI’s vice president of research.
“Some may believe they can work longer or part-time, expect to receive an inheritance or plan to sell a home for a significant profit. Whatever the case, retirement lifestyle expectations are out of step with retirement savings levels and confidence measures,” he said.
Gen X workers believe they will need more income in today’s dollars than baby boomers and current retirees. At the same time, Gen Xers are worried that their retirement savings will not be enough to fund their retirement, and almost one-third of the cohort does not expect to receive Social Security in retirement.
Gen Xers think they need to save aggressively to have sufficient retirement funds to create the income that previous generations have received from Social Security and pensions.
The group lacks faith in Social Security, which could stem from the fact that Social Security’s combined trust fund will be depleted in 2034, only two years after the oldest members of Generation X reach the full retirement age of 67. While current projections show Social Security will be able to pay 76% of benefits after 2034, many Gen Xers appear to believe, incorrectly, that payments will simply cease, the IRI said.
Read: Social Security is now projected to be unable to pay full benefits a year earlier than expected
Only 32% of Generation X workers are confident their savings will last until they are 85 years old or older, compared with 45% of baby boomers and 63% of current retirees.
Despite 6 in 10 Gen Xers having an expectation they will be able to meet basic expenses — for food, clothing, shelter and medical costs — and enjoy leisure activities and travel, relatively few are confident in their ability to live comfortably in retirement.
The IRI said this disconnect could be rooted in the definition of the word “comfortable.” Many respondents may be acknowledging that they don’t expect to enjoy the retirement they would prefer, but they expect to do the things they want to do.
Gen X workers still have time to save, but the current average retirement savings of $404,068 will not support lofty income expectations, the IRI said. In comparison, baby boomers have average retirement savings of $652,780 and those already retired have $624,940, the IRI said.
The study also noted that later-stage workers and retirees overwhelmingly want their income sources to be guaranteed for life. Generation Xers in particular are very interested in investment options that provide downside protection, lifetime income or both.
“Gen Xers’ desire for guaranteed income should be expected given their lack of confidence in Social Security and the endurance of their savings in retirement,” O’Connor said.
