Gen X grim about retirementNews added by Benefits Pro on August 28, 2014

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Joined: September 07, 2011

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By Marlene Y. Satter

Not everyone in the retirement industry might agree, but if you ask GenXers, they’re in plenty of trouble when it comes to saving for life post-work.

GenXers certainly haven’t had an easy time of it. They got walloped by the Great Recession and, according to a Pew Economic Mobility analysis in 2013, lost half their wealth between 2007 and 2010. And that was after a slow start in their careers, thanks to the bursting of the dot-com bubble.

When the housing bubble burst, too, it took them with it; median home values among their age group fell 21 percent from $215,000 in 2007 to $170,000 in 2010.

Now, according to the most recent report from the TransAmerica Center for Retirement Studies, 85 percent of GenX workers (those born between 1965 and 1978) think that they’ll have a much harder time of it in retirement than their parents’ generation.

Eighty-three percent regard Social Security with skepticism, wondering whether it will even be there by the time they need it.

Also, while 57 percent now say they’re on the path to recovery post the downturn, only 12 percent say they’re fully recovered from the effects of the 2008-09 recession. No wonder most (54 percent) say they either won’t retire at all or will have to continue to work after they turn 65. As might be expected, saving for retirement for this generation is not a top priority.

Only 24 percent rate it as their first objective, with 48 percent more focused on other things, such as paying off debt (27 percent) or just paying basic expenses (21 percent). In addition, many of them took out loans (18 percent) from their retirement plans or even early withdrawals (10 percent).

Congruent with that, 34 percent expect their standard of living to go down when they do retire and their estimated median level of retirement savings is only $70,000.

This isn’t the only gloomy GenX survey to have come down the pike, of course.

Notably, a 2013 study by Pew Charitable Trusts forecast that GenXers’ median income replacement at age 65 will be 35 percent lower than for “early baby boomers,” and a decrease of 9 percent compared with “late baby boomers.”

The Pew study said that only a third of GenXers have more wealth than their parents, even though they make more money. The double whammy of the housing market crash and the stock market implosion took care of much of their wealth. The study also hypothesized that GenXers might have to make do with half of their pre-retirement income in retirement, while boomers — admittedly not exactly in the catseat — will have to get along on slightly more, at 60 percent.

And in a 2012 study by the Center of Retirement Research at Boston College, GenXers were also estimated to be poorly prepared for retirement compared with boomers.

As previously reported here, the Employee Benefit Research Institute thinks some of this gloom and doom is overstated. These other studies, it says, are overlooking a couple of important factors.
EBRI said that the Pew study, for one, is wrong because it “explicitly ignores future contributions to defined contribution plans.” That, said EBRI, means that the results are skewed, since those future contributions will exert a “major positive impact” on GenXer savings for retirement.

“Ignoring decades of potential future contributions (as the Pew study does) exaggerates the percentage of Gen X workers simulated to run short of money in retirement by roughly 10 to 12 percentage points among all but the lowest-income group,” EBRI said.

And what about the CRR report? That one’s wrong, says EBRI, because it didn’t consider the impact of auto enrollment and auto escalation that resulted from the Pension Protection Act of 2006 — whereas EBRI’s own Retirement Security Projection Model accounts for future worker contributions to DC plans, as well as auto features incorporated into retirement plans.

As a result, its findings differ substantially from the other two reports, finding that GenXers are pretty much as prepared for retirement as boomers.

In any case, the TransAmerica survey identifies opportunities for GenXers (and, presumably, their advisors) to improve long-term outcomes.

Some are common sense, such as evaluating one’s financial situation, calculating retirement savings needs and developing a retirement strategy. Others involve other people — a professional financial advisor, family members, friends.

Still others might be a little tougher, such as finding the money to put into a retirement plan, if that’s not already happening, or upping the contribution to take full advantage of employer matches. Or even working longer, finding additional work, and staying prepped to take full advantage of the job market—even if that means upgrading skills.

One thing they shouldn’t be doing, said Catherine Collinson, president of TransAmerica Retirement, is procrastinating.

“Procrastination is the enemy,” said Collinson. “Our survey found that 39 percent of Generation X workers prefer not to think about or concern themselves with retirement investing until they get closer to their retirement date.”

And by then, it’s could well be too late.

Originally published on
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