Can Gen Xers Afford To Retire?

A neon sign with the words "Generation X."

(Image credit: Getty Images)

published 24 November 2023

Andrew Shiflett thinks he’ll be financially able to retire, but he’s not sure if he’ll ever be able to take that step mentally.

The 51-year-old chemical engineer from Raleigh, N.C., has worked at three companies during his 30-year career, but he’s seen big swings in how organizations — and generations — view retirement. It used to be that you worked, you saved, you retired. Not so much anymore.

“I want the last check in my life to bounce,” jokes Shiflett, who is married and has two daughters, ages 16 and 13. “I say I don’t know how to retire, I’ve got to keep working. I’d probably be content to do nothing — there’s a lot of stuff on Netflix I haven’t seen. But I’m not sure what I will actually think when I get closer to that time.”

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Shiflett started saving for retirement after college when he started working for DuPont. At the time, the company offered a pension, but around 2006, the organization, like many others, started moving employees to a 401(k).

“I know that hurt a lot of people, those who were close to that magic age of 50, when you could take your full retirement, when your pension was fully loaded,” Shiflett says. “Those people who were 45 or 46 and then the company pulled the rug out from under them. That really hurt them.”

It worked out financially for Shiflett. He ended up buying out his pension and opening several IRAs through Vanguard when he moved from DuPont to Novo Nordisk. That company, based in Denmark, offered a generous retirement package, putting in 8% of his pay automatically and then matching 50 cents on the dollar for another 2%.

Now he works with Jacobs Engineering as an engineering consultant. Although he has around $1.5 million saved, he’s not sure of an end goal.

“Life will unfold as it should,” he says. “I'm not worried about where I'm going, but I know I’m not there yet and I need to keep working.”

An overlooked generation

For Generation X, often called the “forgotten generation” born between 1965 and 1980, retirement is not that far off. But many haven’t planned for it at all, with the typical Gen X household having just $40,000 in retirement savings, according to a study by the National Institute for Retirement Security, a nonprofit research organization funded largely by insurers and state and local retirement systems.

Experts say this 43-to-58 age group bridges many gaps, economically, socially and technologically, creating different obstacles to financial security than their elders, the Baby Boomers and the Silent Generation, and their younger cohorts, the Millennials and Generation Z.

In some ways, they have fared well. More than 70% own their own homes, according to real estate group Redfin, behind Boomers (1946-1964) at 79% but ahead of Millennials at 52%. They have taken out fewer loans from their retirement accounts—33% compared to 46% of Millennials, according to the Transamerica Retirement Survey of Workers.

But in other ways, Gen Xers are struggling. In 2015, the year the oldest Gen Xers turned 50, Federal Reserve data show the generation held 17% of the nation’s wealth. Compare that to the Boomers, who held 31% in 1996, the year they turned 50. Today, Gen Xers hold 29%, versus 53% held by Boomers.

Gen X also carries 57% of the country’s $1.63 trillion student loan debt, averaging more than $44,000 in outstanding loans — more than any other age group.

Workers without pensions

There have been two large financial challenges for Gen X, economists say. The biggest change was job security, both in terms of long-term stability as well as employer-provided pensions. They go hand in hand, says Karen Smith, a senior fellow in the Income and Benefits Policy Center at the Urban Institute in Washington, D.C., who studies demographic and economic trends.

As a result, fewer than a quarter of Gen Xers say they feel “very” confident that they will be able to fully retire.

Dan Doonan, the executive director of the retirement security institute and a Gen X member himself, says he thought the results would be better because many graduated in the dot-com boom years, helping them get a foothold in the workplace and a start on retirement. But while about half of those surveyed have some savings plan at work, the rest have very little saved for the future.

Gen Xers were the first generation of workers for whom “defined contribution” retirement plans, such as 401(k)s, were far more common than traditional “defined benefit” pensions. One study by the Bureau of Labor Statistics found that only 18% of private-sector workers had pensions, compared to 35% in the early 1990s.

The pensions encouraged workers to stay longer because the longer they stayed, the better the pension. According to one study, Baby Boomers stayed at a job an average of eight years and three months. For Gen X, that number dropped to five years and two months. Millennials and Gen Z expect to stay at a job two to three years.

“I would also say the elimination of pensions has rearranged the incentives for workers,” Doonan says. “There's sort of a chicken and an egg here—factories used to want you to come there out of high school and work your full career.” Today, however, he isn’t sure many companies want or expect employees to stay for 30 years or more.

(The dependence on individual retirement accounts had an unexpected negative fallout during the pandemic, when many older workers faced hardships and took money out of their retirement accounts — often at a substantial financial penalty. According to a 2021 study, those over the age of 45 were hit hardest by long-term unemployment from the pandemic.)

To be sure, not everyone is so worried about Gen X. Smith, from the Urban Institute in Washington, D.C., says she’s been hearing the story about the retirement crisis for every generation for the past 20 years, first the Boomers and now Gen X and the Millennials.

Each “crisis” is sparked by different events, whether it’s housing prices rising or crashing or the stock market roller coaster. Most recently, the crisis was caused by the pandemic’s unemployment and mortality fallout.

Smith, 65, did not start saving for her own retirement until her 40s, she says, after paying off her student loans and then saving money for a down payment for a house. So it’s not really a Gen X financial retirement crisis, she says, but more of a lifestyle phenomenon. “The cost of schooling went up and the cost of housing went up, so you’ve got more debt to pay down,” she says. “It’s not that they won’t have savings to retire, it’s just that they haven’t gotten to that point in their lifecycle.”

Long-term, Smith believes the Gen X retirement problem will be addressed by raising the retirement age for Social Security. The age was raised to 67 from 65 as part of the 1983 Social Security reforms. Although there is no clear political consensus today to raise the age again, the most common proposals call for a gradual increase to age 70.

Raising children, caring for parents

Some people believe they will never be at a point when they can retire. Heidi McDonald, 53, dropped out of college in Arizona at 19 and made a decent living as a singer in a band. Then someone stole her uninsured music equipment. She moved back east and started working freelance corporate communications jobs.

By the time she was 33, she was divorced and raising a family. It wasn’t until she turned 48 that she started contributing to a 401(k).

“It was the first time I could afford to put anything in, because I was raising three kids, and my father was in and out of a job, so there were lots of times I had to bail my dad out,” she says.

No job has lasted longer than four years. Most recently, she worked as a writer for Netflix for a year and was able to put away $16,000. Then she was laid off and is now looking for a job.

“My retirement plan is to drop dead, honestly,” she says, adding that most people she knows are in the same position. “Of all of the people who are my age, two of them will be well off enough to retire. One of them married well, and the other one got a master’s in engineering.”

Hardships for women

For Gen X women in particular, money and retirement can be a taboo subject, something that is improving with younger generations, says Tori Dunlap, creator of the financial education company Her First $100k. She points out that women retire with less money saved than men, resulting in one in 10 women over the age of 65 living in poverty, according to one study. The poverty rates are higher for Black, Hispanic and Asian women over 65.

GenX women are more likely to work at a younger age — including those who are married and have children, according to a study from the Bureau of Labor Statistics. But during the pandemic, women in general were far more likely to be laid off, accounting for 63% of all jobs lost, according to the National Women’s Law Center.

This drives home the point that there are larger factors at play impacting retirement savings, says Dunlap. Instead, people often blame the individual, who often has no control over the situation.

“Americans being ill-equipped to retire comfortably is not a moral personal failing,” she says. “It's a lack of systemic support or societal support.”

Doing reasonably well

Kyle Cassidy has no idea how much he has in his retirement account. He doesn’t care much because, along with much of his age group, he can’t wrap his mind around the idea of not working in some capacity.

The 57-year-old artist, whose photo books explore subjects as varied as librarians, gun owners and military tattoos, started putting away money early at his first job. But he’s never looked at the amount.

“The first real job I had, I had a savings, or maybe it was a retirement account and during the first two years or so, I saved almost $1,000, and maybe it’s accrued $2 or $3 in interest over the years,” says Cassidy, who lives in Philadelphia with his wife, who is an actress.

“But then I started making considerably more money, and I think I’ve been saving 5% of my income regularly for the past 30 years. But my sister, who is an economist, once told me to put my money in a retirement account and never look at it.”

Cassidy is not particularly worried about the amount in the account, in part because he does not have children to support. His house, which he owns outright, is also an important asset.

“It could be an income generator because it has an apartment attached to it,” he says. “I could theoretically live off of that without any of the retirement savings as long as my house doesn't burn down.”

Of course, not everyone is in as safe a spot as Cassidy or Shiflett. Doonan, the executive director of the retirement institute, says it’s important for Gen Xers to have conversations about money now if they want to avoid a disastrous old age.

“You're going to see a lot of people, a lot of retirees, going without the resources they need, and they won't necessarily have a good life,” he says.

But he thinks not all is lost: “I’m afraid we’re going to fix this on the back end, whereas it would be better during your working years to have more resources going toward retirement.”

Costly divorce

For Nick Jungman, 51, a journalism professor at the University of Kansas in Lawrence, things were going along well for a long time. But after he got divorced 12 years ago, his finances never really recovered, he says.

His ex-wife got the family home, so Jungman had to establish a new household for himself. He also pays child support. He’d like to buy a home, but prices in his college town are “kind of a little bit crazy,” and he worries about having a 30-year mortgage into his retirement years. Although he’s saved about $300,000 in a 401(k), he knows that others have saved much more, and it weighs on him. He hopes that there will be something left of the pension from the former newspaper company he worked for.

Jungman, who has a daughter just starting at his university (with a tuition discount), hopes he’ll be able to retire in his late 60s, and thinks retiring somewhere abroad, like Mexico, might be the best choice financially.

“But who knows? I mean, I'm still single, I haven't remarried or really even had a serious relationship since my divorce,” he says. “If I did, you know, this could all change.”

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

Dawn Fallik is a Philadelphia-based reporter who specializes in data analysis. She was a reporter for The Philadelphia Inquirer, The Wall Street Journal and The Associated Press. She has served on the Pulitzer jury and is a tenured professor at the University of Delaware.