Gen X? Challenges Lie Ahead as Retirement Nears

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Kerry Hannon is coauthor of Retirement Bites: A Gen X Guide to Securing Your Financial Future. She recently spoke to Kiplinger Personal Finance about the unique challenges facing Gen X — those born between 1965 and 1980 — as they try to save for retirement, as well as the generational strengths that will work in their favor.

Q: What is unique about the challenges that Generation X faces when it comes to retirement compared with other generations?

Hannon: The 64 million people in this generation, who range in age from 45 to 60, entered the workplace when traditional pensions were sliding out of view and 401(k)s were stepping onto the scene. In the early years, nobody really understood what a 401(k) was, and there was little assistance from your employer. And Gen X didn’t have the benefit of automated-participation features that are helping younger workers save earlier for retirement.

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They have also lived through a lot of economic upheaval that has dealt a blow to their retirement savings: the dot-com bust, the Great Recession, and then the pandemic. And many of them have a ton of credit card debt, more than any other generation.

Q: That’s a pretty bleak picture. Is there anything that’s working in their financial favor?

Hannon: Absolutely. All that economic upheaval has made them very resilient and self-reliant. We’ve seen them, in recent years, truly buckling down and starting to save more. They’re very entrepreneurial as well. This is a group who’s coming to understand the need to work longer than previous generations, and they’re already thinking about what they might do and what skills they need to add.

Another positive thing is that many Gen Xers have a lot of equity in their homes. It may not be money stashed away in a retirement account, but they have access to financial viability through home equity. And the younger Gen Xers, who are in their forties, may be beneficiaries of the great wealth transfer from the generation above them. That will help augment their retirement savings as well.

Q: What are the key steps Gen Xers need to take now to ensure a comfortable retirement?

Hannon: As they become empty nesters, Gen Xers will have more opportunity to become super savers and take advantage of things like the catch-up contributions that people 50 and older can make to their retirement accounts. It might also be a good time to pull some of that valuable equity out of their homes and relocate to a place where the cost of living is lower, maybe buy a home with cash so they have no mortgage. That would tee them up nicely for a more financially secure retirement.

Q: The oldest Gen Xers are close to being old enough to claim Social Security early, at age 62. Any advice about timing those benefits?

Hannon: We are collectively living longer lives. If you step out of work at age 62 or even age 65, you could have three decades or more to support yourself in retirement, and that is daunting. Of course, none of us knows how long we’ll live, so it’s a bit of a gamble. But if you keep working and hold off collecting benefits until age 70, or at least until full retirement age [age 67 for Gen X], that bigger check could be very helpful moving forward.

Q: Are there any practical or motivational tools you can recommend to help Gen Xers with this last big push toward retirement?

Hannon: One idea is to shift how you frame things. I always tell people, you’re not saving for retirement, you’re saving for your life, which means being able to spend more time with family, pursue hobbies you love, travel. I like the idea of visualization as psychological motivation for saving and managing money, literally creating a vision board about what you want your retirement to look like and letting yourself dream.

There are also so many great digital resources out there to help us run our numbers and make it easier to find a financial adviser — possibilities that weren’t there for previous generations. You do not have to do this alone. But you do have to do it: It is time for Gen X to get clear-eyed and serious about how to make sure their retirement is on track.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

An award-winning financial journalist and editorial leader, Diane Harris is currently deputy editor of Kiplinger Personal Finance, where she helps direct the magazine’s coverage of retirement, savings, taxes, credit, financial planning, family finance and other core personal finance topics.

With more than three decades of magazine and digital journalism experience, Harris is the former deputy editor of Newsweek, as well as the former editor-in-chief of Time Inc.’s Money magazine. Her work has also appeared in The New York Times, TIME magazine, AARP the Magazine and AARP.com among other publications.