The majority of Americans know they'll need to rely on their retirement savings as an income source when they hit their senior years.
In fact, according to Fidelity, 61% of people currently working and planning for retirement believe that their savings will be one of their biggest income streams. That's up from 50% of today's retirees who say that IRAs, 401(k)s, and other retirement plans are a primary income source.
Even though most people know they need retirement savings, not everyone is confident they'll have it. Fidelity's research also revealed that 62% of savers are uncertain whether their money will last as long as they need it to. This concern extends across all generations -- but Fidelity's research also found that one particular generation was facing the biggest challenges when building a nest egg.
Image source: Getty Images.
This generation is having the hardest time preparing for retirement
According to Fidelity's research, Gen X is having the toughest time with retirement readiness. Only 53% of Gen Xers are confident they'll be able to retire when and how they want to, compared with 75% of Gen Zers, 71% of Millennials, and 68% of Baby Boomers.
Researchers believe that competing financial demands placed upon Gen Xers are the reason why people within this demographic group are struggling so much. Many people within this age range currently have young families they're raising -- an expensive proposition in and of itself. Unfortunately, many are also caring for aging parents, which can come with costs both in terms of less time and energy to work and earn, and in terms of actual costs associated with caregiving, such as retrofitting a home or buying adaptive devices.
Compounding this problem, around 30% of Gen Xers say that dealing with inflation and rising costs of living are a primary challenge when investing for retirement. Prices have increased significantly in the latter-pandemic era, adding to the strain of a generation that's already feeling financial distress.
How can Gen Xers -- and others -- prepare for a secure retirement?
While it's understandable that members of Gen X are struggling with retirement readiness, the reality is that they need to overcome the issues holding them back from retirement preparation and get serious about saving.
As life spans rise and projections for future investment returns become less rosy, experts have warned that retirement nest eggs may not produce as much income as they did in the past. Specifically, while the 4% rule was once thought to be a good benchmark and retirees were told they could withdraw 4% of their account balance and still be able to preserve their funds, this has now been revised down to a 3.7% rule.
Those already struggling to save will be unhappy to discover they need to invest more, but it's better to sacrifice some now than to be forced to sacrifice a lot later. Gen Xers and others who want a secure future should make a detailed budget to find room to invest. They should also make sure they're investing wisely with an appropriate mix of assets and a plan to hold on to their stocks for the long term.
While this is undoubtedly a challenge and many workers -- especially those in Gen X -- may have to make some tough decisions about spending cuts, it's also crucial to building the future security that every retiree deserves.
