Gen X confronts ‘harsh new reality’ with retirement readiness

The cohort is unprepared for retirement but only 16% plan to use home equity as a funding source

More than one-third of the members of Generation X — those born between 1965 and 1980 — have less than $10,000 in retirement savings. This generation is also largely missing out on a transfer of wealth from their baby boomer parents, according to a Prudential Financial survey released this week.

In addition to lacking retirement savings, 46% of Gen X — or roughly 30 million people — fear that they won’t have enough money saved to maintain their lifestyle during retirement. These fears reflect the general lack of savings, according to the study.

While 35% of Gen X has less than $10,000 saved for retirement, about 18% — or about 12 million people — have no retirement savings at all. And, 47% of those surveyed expect to have to work longer than intended to stay on top of their finances. About 40% plan to work part-time after leaving a full-time job or career.

Only 16% of Generation X respondents plan to use of their home’s equity in retirement as a funding tool.

“Most of Gen X are not planning to follow in the footsteps of baby boomers, who are tapping into record home equity and currently make up the highest share of buyers and sellers nationwide,” the survey results state.

Difficulties Gen X retirees will face may come from disruptions in how retirement is working, according to Rob Falzon, Prudential’s vice chair.

“Gen X faces one of the most complex landscapes for retirement readiness in decades, including the decline of defined benefit pension plans which supported prior generations’ retirement, as well as significant uncertainty about the economy and long-term Social Security benefits,” said Falzon. “This data underscores how important it is for Gen X to adopt a new set of retirement strategies designed to protect and grow their savings, and, when possible, translate their assets into reliable sources of future income.”

Retirement obstacles members of the generation will face or are facing include a reduction in defined-benefit pensions and a potential over-reliance on Social Security, despite the program’s insolvency. Plus, nearly half of respondents saying they lack a retirement savings plan and inflation serves as an impediment to savings goals.

Gen X workers are also concerned about job security, the study shows.

“While an economic downturn still ranks as the biggest threat to job security among working Gen Xers (35%), fears of being replaced by younger (29%) and less expensive (26%) workers are close behind,” the results state.

Baby boomers are currently the largest demographic that can be served by the reverse mortgage industry. However, Generation X has early entrance into the space now that lenders have lowered the qualifying age of proprietary products to 55 in some states.

Like baby boomers, Gen X would prefer to age in place. Unlike baby boomers, there may be less willingness to explore home equity as a retirement funding tool, according to the Prudential survey.

While Gen X is not currently the predominant reverse mortgage demographic, some lenders have said in the past that they were monitoring the cohort and preparing to appeal to more of its members in the future.

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