Most Gen Xers are still in the workforce, but retirement is just around the corner. While it may have once seemed like a period of freedom and relaxation, many now look toward it with trepidation as they try to sort out how they'll pay for the decades of living expenses they still have ahead of them.
It's a challenge every worker faces to some degree, but Gen X is facing some unique obstacles that previous generations didn't have to deal with. We'll look at three of them below, along with some strategies for handling them.
Image source: Getty Images.
Lack of access to pensions
Pensions were a common source of retirement income for past generations, but employers have increasingly quit offering them. The number of businesses offering pensions to their employees dropped by 73% from 1985 to 2020, according to a recent Prudential survey. Now, just 20% of Gen Xers expect to have some sort of pension income in retirement, and only 11% will mostly rely upon a pension.
This shift has placed a much greater burden on workers' shoulders, as they have to find a way to save a lot more on their own than workers in previous generations. And many are struggling to do so.
Small nest eggs
Despite their best efforts, many Gen Xers haven't saved nearly enough for retirement. About 35% of workers have less than $10,000 set aside for retirement, and 18% have nothing saved at all, according to Prudential.
Most Gen Xers won't be able to count on any sort of inheritance from their relatives, either. Just 12% say they expect an inheritance to provide a source of income for them in retirement.
Social Security's uncertain future
Social Security has provided benefit checks to retired workers and their family members for decades and will continue to do so in the foreseeable future. But its buying power has been decreasing steadily over the years and is down about 40% since 2000.
There's also a fear of benefit cuts because the program's trust funds are expected to be depleted in about a decade. There's still time for the government to step in and find an alternative way to fund the program, but there's no way to know what this solution will look like right now.
How can Gen Xers ensure a comfortable retirement?
The three issues discussed above are all serious concerns for Gen X workers, and many are already taking steps to combat them. Almost half expect to work longer than they initially expected, according to Prudential, and about 40% plan to work at least part-time once they're retired.
Many are also looking for opportunities to cut costs. For example, only about 15% of those surveyed said they planned to split their time between two places in retirement.
These are all smart strategies, but they may not be your only options. Some other things to consider include:
- Choosing your Social Security claiming age carefully: The age at which you claim Social Security affects the size of your checks and, consequently, your lifetime benefit. Review all your options and choose the age you believe will provide you with the most money overall.
- Consider a reverse mortgage: Homeowners 62 and older with considerable equity in their homes can tap this as a source of retirement income with a reverse mortgage. However, this may not be ideal if you plan to move soon or you'd like to pass on the home to your heirs.
- Put your savings where it'll do the most good: A 401(k) is a great place for retirement savings, especially if your employer offers a matching contribution. If you don't have access to a 401(k), you can always save in an IRA as you have the extra cash. These accounts give you greater flexibility to invest how you want.
These tips may not all work for you, but consider trying a few to see what kind of a difference they can make. See if you can brainstorm any additional retirement income strategies as well, and don't be afraid to alter your retirement plan if your goals or lifestyle change.
