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Half of Gen Xers who are nearing retirement age say they need a miracle.

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This month marks a big milestone for the oldest members of Generation X, those born between 1965 and 1980: they will turn 59 1/2. At this age, individuals can begin taking early, penalty-free withdrawals from their retirement savings. But a lot of Gen Xers are not ready for their golden years at all. According to a recent Natixis survey, over half of them think a “miracle” would be necessary for them to have a comfortable retirement.

The Transition from 401(k) Plans to Pensions

The first generation of American workers to rely heavily on 401(k) plans for retirement is Gen X. This change started in the 1980s when companies mostly stopped offering traditional pensions. Individuals who participate in 401(k) plans must manage their own retirement funds, in contrast to pensions. Many Gen Xers are finding it difficult to comprehend basic financial principles and preserve enough money as a result of this do-it-yourself strategy. Renowned retirement expert Teresa Ghilarducci has called this method weak.

Not Ready for Retirement

Gen Xers are dreadfully unprepared for retirement, claims Natixis. A Gen X household’s average retirement savings is around $150,000, which is far less than the $1.5 million that most Americans think is necessary for a decent retirement. The inability to comprehend crucial financial information exacerbates this financial deficit.

Generation X: The Next Generation’s “Jan Brady”

The Natixis Center for Investor Insight’s executive director, Dave Goodsell, compares Gen X to Jan Brady, the frequently disregarded middle kid from “The Brady Bunch.” Having grown up between the bigger baby boomer and millennial generations, Gen Xers sometimes feel abandoned and on their own as they get closer to retirement.

Financial Concerns and Expectations

The Natixis study highlights several concerns among Gen Xers regarding their financial future:

One in five worry they won’t be able to afford to retire even if they manage to save $1 million.

One-quarter fear they might have to return to work after retiring due to insufficient savings.

A startling 40% haven’t saved anything for retirement, according to the National Institute on Retirement Security.

Many Gen Xers still hope to retire at age 60, anticipating that their retirement would last around 20 years, despite these worries. Given their financial situation, this optimism seems a little incongruous, but Goodsell dismisses it as “wishful thinking.”

Irrational Expectations for Investment

Furthermore, Gen Xers have irrational expectations for their investment returns, according to the Natixis data. They project 13.1% long-term gains above inflation. This would need an overall return of 16.4%, far higher than the S&P 500’s historical average yearly return of around 10%, given the current inflation rate of roughly 3.3%.

Furthermore, just around 2% of Gen Xers are aware of important bond investment concepts including how rising interest rates affect bond values. For Gen Xers, Goodsell says, “learn as much as you can and be realistic about what you can accomplish.”

Retirement’s Realities

The fact that certain parts of retirement are out of their control is one of the hard realities facing Generation X. Realistic concerns about not being able to work as long as they would want are shared by about 40% of respondents. According to a 2018 Urban Institute research, most employees were forced to quit their jobs before they reached retirement age, frequently as a result of job losses or ill health. Just 19% of people choose to retire.

Steps Towards a Better Retirement Future

To improve their retirement prospects, Gen Xers need to take proactive steps:

1. Increase Savings: Regularly contribute to retirement accounts and take advantage of employer matching if available.

2. Financial Education: Enhance understanding of financial concepts and investment strategies.

3. Realistic Planning: Set achievable retirement goals based on a realistic assessment of financial situations.

4. Professional Advice: Seek advice from financial advisors to develop a robust retirement plan.

Many Gen Xers are unprepared for retirement and fearful about their financial situation as they get closer to it. Even while 401(k) plans have replaced conventional pensions, putting more of the burden on people, Gen Xers still have time to act. Even if it seems like a miracle would be needed right now, Gen Xers can strive towards a more secure retirement by saving more, becoming better financial readers, and making realistic plans.

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