National Institute on Retirement Security Analysis Indicates Bottom Half of Generation X Earners Have Almost Nothing Saved for Retirement

A new report from the National Institute on Retirement Security (NIRS) finds a dismal retirement outlook for Generation X, the first generation to enter the labor market following the shift from defined benefit pension plans to 401(k)-style defined contribution accounts. When looking at median retirement savings levels for Generation X, the bottom half of earners have only a few thousand dollars saved for retirement, and the typical household has only $40,000 in retirement savings. Retirement savings for Generation X is highly concentrated among the highest earners, while Blacks and Hispanics have substantially lower savings and access to retirement plans as compared to whites.

The new report, The Forgotten Generation: Generation X Approaches Retirement, is authored by Tyler Bond, NIRS research director, Celia Ringland, NIRS research associate, and Joelle Saad-Lessler, Stevens Institute associate professor and associate dean of undergraduate studies. The report examines a wide range of metrics for assessing retirement preparedness, including sponsorship, take-up, and participation rates in employer-provided retirement plans. This research also assesses current rates of plan coverage, coverage by industry, and retirement account balances, with analyses by race, gender, and marital status where applicable.

"Gen Xers are fast approaching retirement age, but the data indicate that the vast majority are not even close to having enough savings to retire," said Dan Doonan, NIRS executive director. "This really isn't surprising given the terrible retirement hand that has been dealt to the latchkey generation. Most Gen Xers don't have a pension plan, they've lived through multiple economic crises, wages aren't keeping up with inflation, and costs are rising. The American Dream of retirement is going to be a nightmare for too many Gen Xers."

The report defines Generation X as those born between 1965 and 1980. As of December 2020, Gen X represented almost 64 million Americans, or nearly 20 percent of the population.

"A big part of the problem is that far too many Gen Xers don't have access to a retirement plan through their employer. Only 14 percent of Gen Xers have a pension plan, and only about half are participating in a retirement plan at their job," Bond said. "As a result, a large share of Generation X has virtually nothing saved for retirement, and most who are saving are not close to savings targets that will enable them to retire with their current standard of living. Accruing savings takes time, and Social Security alone won't provide enough retirement income. So it's critically important that we change course quickly. The status quo means we are looking at elder poverty for many Gen Xers and pressure on their families for support."

Additional key findings of the report are as follows:

• Retirement savings for Gen X is highly concentrated among top earners. For the mean, the top quartile holds nearly $250,000, while the bottom quartile holds only $35,000.
• The bottom half of Gen X households has almost nothing saved for retirement. When looking at the median, the bottom quartile has $200 saved for retirement, and the second quartile has $4,290.
• The typical Generation X household only has $40,000 in retirement savings in private accounts.
• There is a large discrepancy between average and median amounts of retirement savings, and this discrepancy holds across gender, race, income, and other measures.
• Only fourteen percent of Gen X is covered by a defined benefit plan, and this low level of coverage is fairly consistent across gender and race.
• Only about half (55%) of Gen Xers participate in an employer-sponsored retirement savings plan. For Hispanic Gen Xers, only 35% participate in an employer-sponsored retirement plan.
• Across race, gender, marital status, or income, the vast majority of Gen Xers are failing to meet retirement savings targets. Nearly all Black and Hispanic Gen Xers have less than half of their retirement savings targets.

The report also offers an analysis of solutions that could improve the retirement outlook for Generation X related to Social Security, SECURE 2.0 legislation, state-facilitated retirement plans, and tax policy. The analysis for this research relies upon data from the Survey of Income and Program Participation (SIPP), a nationally representative longitudinal survey that provides comprehensive information on the dynamics of income, employment, household composition, and government program participation.

The National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers, and the economy as a whole. Located in Washington, D.C., NIRS membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers. More information is available at www.nirsonline.org.

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