21 June 2018

Gen X Retirement Prospects Look Bleak

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For Generation X, the block of Americans born between 1966 and 1975, retirement prospects look bleak because of vanishing wealth. The recession from December 2007 to June 2009 erased $16.4 trillion in wealth, making reaching retirement goals more difficult for tens of millions of Americans.

According to research conducted by The Pew Charitable Trusts, a typical Gen X couple only has enough retirement savings to replace about half of pre-retirement earnings. This is much lower than the 70-100 percent of pre-retirement income replacement recommended by most financial planners. In contrast, early Baby Boomers (those born between 1946 and 1955) can expect to retire with about 82 percent of their pre-retirement earnings, and younger boomers (those born between 1956 and 1964) can expect to retire with about 59 percent of pre-retirement earnings.

Looking at net worth, Gen X’ers lost the most, with 45 percent of their pre-recession net worth of $75,077 vanishing between 2007 and 2010, the Pew study said. Depression-era babies born between 1926 and 1935 saw their median $207,965 nest egg virtually unchanged. War babies, born between 1936 and 1945, suffered a typical loss of 20 percent to their pre-recession net worth of $265,797.

Interestingly, almost all generations enjoyed a net gain from the decade-long housing bubble than they lost in its immediate collapse, Pew found. But the meltdown in the real estate market was the largest drain on net worth during the recession and Gen X’ers were hit hardest. They suffered a median 27 percent loss of $18,052, out of their $67,052 home equity figure. Early boomers, whose home equity amounts soared 96 percent during the housing bubble, lost about 22 percent of their $143,532 in home equity during the recession. Late boomers lost approximately 14 percent of their $104,768 in pre-recession home equity, Pew said.

Based on the research, Gen X’ers may face significant financial stress in retirement and should focus on ways to build retirement wealth wherever possible, such as company-sponsored 401(k) plans or IRA’s.

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