Gen Xers are not financially prepared for retirement | CNN Business

new york
CNN
—

Generation X is currently in their 40s and 50s and makes up about one-fifth of the U.S. population. But as the next generation to follow the baby boomers into retirement, their experiences may hold lessons for those coming after them.

According to a recent report from the National Institute on Retirement Security, many Gen

“The data shows pretty clearly that the system we currently have in place is not able to provide enough income for many workers,” said David E., director of research at NIRS and author of “The Forgotten Generation: said Tyler Bond, co-author of “Generation X Approaches Retirement.”

The system Bond refers to is the model in which Gen Xers do most of their adult retirement savings when they reach adulthood. They are the first generation to enter the labor market after transitioning from an employer-run defined benefit pension plan to his 401(k)-style defined contribution account.

Although the oldest Gen X adults are more likely than younger generations to have at least some pension income to supplement their retirement savings and Social Security benefits, most do not.

Specifically, a NIRS report that analyzed 2020 data from the Federal Income and Planned Participation Survey found that only 14% of working Gen .

When it comes to workplace retirement plans and IRA savings, “The bottom half [Gen X] Earners only save a few thousand dollars,” the authors of the NIRS report wrote. And the median amount Gen X households have saved for retirement (meaning half have less and half have more) is just $40,000.

Income is the single biggest factor determining who is building savings and who is not. “Gen X’s retirement savings are concentrated among the highest earners,” the report said.

Nevertheless, the average retirement savings balance of Gen If you are aiming for , this suggests that you may not be saving enough. This is a likely scenario for many people, since most people don’t have pensions, and high earners (with a wide range of career average earnings) don’t have Social Security benefits. (approximately between $100,000 and $150,000 under the Social Security model) would only replace one-quarter to one-third of your income if you retired at your “full” retirement age (age 67 for Gen Xers). The purpose is that.

Also keep in mind that Social Security benefits for some people may eventually be reduced. That’s because lawmakers have yet to grapple with the program’s long-term solvency. Current projections suggest that if no action is taken, Social Security will only be able to pay out 80% of its promised benefits by 2034, when Gen Xers begin to retire.

Obvious racial and ethnic differences

While high-income earners of all groups outperform low-income earners, black and Hispanic workers have the lowest savings accumulation, especially when viewed through the lens of employed Gen X race and ethnicity. They are the group least likely to access or participate in employer-sponsored retirement plans.

The average retirement account balance is $53,456 for Black workers and $42,335 for Hispanic workers. The median prices are $1 and $0, respectively, the report said. In contrast, white workers averaged $165,917 and Asian workers averaged $189,764, with medians of $26,900 and $30,000, respectively.

But overall, the report found, “regardless of race, gender, marital status, or income, most Gen Xers are underachieving their retirement savings goals.”

Setting benchmark goals It can be difficult because each person’s situation is different and can change over the years, for better or worse. However, one rough recommendation suggests that by age 45, a woman should have saved two to four times her household income. 3 to 6 times by age 50 and 4.5 to 8 times by age 55.

How much an individual should save before retirement depends on many factors, including retirement age, marital status, where and how they plan to live, whether they will receive a steady monthly salary from their pension, and how much they can expect from their pension. Depends on factors. The amount you receive from Social Security and other potential sources of income in retirement, such as part-time work or rental properties.

If you’re a Gen It might help.

Evaluate your position. Understand the income sources and income-producing assets that may be available to you in retirement. For example, you can request a benefit estimate here to determine how much Social Security might pay you based on your historical income. Your 401(k) provider, such as Fidelity, Vanguard, or T Rowe Price, likely has an online calculator to help you assess whether you’ll have enough saved for retirement.

Decide what changes you can make. Whether you want to save more, plan for retirement later, or postpone receiving Social Security benefits until age 70 to receive a larger monthly check, you can now take control of your financial future. Now is a good time to think about what steps you can take to improve your situation.

If you can afford it, consider a fee-only certified financial planner or a financial advisor who declares a fiduciary responsibility to serve only your interests and does not pay commissions for entrusting client funds. You may also receive helpful guidance. Certain investment products. Or, see if your employer has an employee assistance program (EAP) that offers free or subsidized financial coaching.

Stay up to date on new programs and benefits: Nineteen states and more programs have been introduced to make it easier for workers and the self-employed to save without access to workplace retirement plans. Most take the form of an automatic IRA contribution model, which provides an easy and tax-advantaged way to save and invest for retirement through automatic deductions from your paycheck. Rules vary by state, but some allow employers to contribute to employee accounts.

Meanwhile, two recently enacted federal laws aim to help working adults save more and access workplace retirement plans. They are the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 and SECURE 2.0, which was enacted last year.

One provision that may be particularly helpful to Gen It is a requirement that you must do so. 2 years in a row.

Additionally, changes to the existing Savers Credit could help low-income Gen Xers. “The Savers Credit will become a Savers Match starting in 2027 and, importantly, will be refundable, meaning taxpayers will no longer have to incur tax liability to claim the match,” the NIRS report notes. ing. “The Saver’s Match is 50 percent of a tax filer’s retirement plan contributions, matched up to $2,000, and the match amount is deposited directly into the filer’s retirement plan account.”