Numbers don’t lie – and according to a recently released report, Gen X has the largest retirement savings wealth gap when compared to any other generation.
“Cut back on spending and increase savings. That’s all they could possibly do,” Thru the Cycle President John Lonski said on “Varney & Co.” Tuesday. “When are they going to go ahead and make that type of move? It’s beyond me. But it might well be that this consumer spending spree that’s been around 2022 to 2023 may disappear in 2024.”
Schroders’ 2023 U.S. Retirement Survey found that people between the ages of 43 and 58 say they need $1,112,183 for a comfortable retirement, but only expect to have $661,013. That gap of $451,170 exceeds the estimated savings shortfall facing millennials and baby boomers.
“As the first generation to head into retirement largely without the safety net of a defined benefit pension plan, the stakes are higher for Generation X and the margin for error is lower,” Schroders Head of U.S. Defined Contribution Deb Boyden was quoted in the study.
Additionally, 45% of Gen X respondents say they have not done any retirement planning compared to 43% of millennials and 30% of boomers.
What’s more, two-thirds worry they won’t grow their workplace retirement plan as high as they hoped.
“The sooner consumers pull back on spending, the milder the next recession will be. It seems the longer they hold off on cutting back on spending, interest rates stay higher for longer. And when that downturn comes, it’s going to hurt,” Lonski reacted.
“A year ago, I looked at something like restaurant sales. They were up by nearly 10% from a year ago, [in the] final quarter of 2022,” he continued. “So I said to myself: Well, my goodness, by the final quarter of this year, restaurant sales will be lucky to grow by 5%. Guess what? They’re still growing by nearly 10%. So there was perhaps more excess cash out there lingering around because of the massive stimulus.”
The report also spotlights how Gen X’s attempt to close the wealth gap “won’t be easy,” as 32% of survey takers have all their assets in cash and, separately, only 11% will wait until age 70 to receive maximum Social Security benefits.
Fear is the alleged primary reason for these trends, as Gen X worries they’ll lose all their cash or Social Security will soon become insolvent.
In March, the Social Security and Medicare Trustees report found Social Security’s retirement fund could run out of money as soon as 2033, a year earlier than previously projected.
However, there’s still some glimmer of hope, according to Schroders’ Boyden: “Fortunately, even the oldest Gen Xers have some time before reaching their full retirement age. Using this time to develop a retirement plan, increase their savings rate and invest more appropriately is crucial to improving their retirement readiness before it’s too late.”
