GENERATION X RETIREMENT READINESSn Seven in 10 GenXers have less than $5,000 in an emergency fund;...
Transcript of GENERATION X RETIREMENT READINESSn Seven in 10 GenXers have less than $5,000 in an emergency fund;...
MARCH 2018
THEY’RE (MOSTLY) DOING IT WRONG
GENERATION X and
RETIREMENT READINESS
About the Insured Retirement Institute:
The Insured Retirement Institute (IRI) is the leading association for the retirement
income industry. IRI proudly leads a national consumer coalition of more than 30
organizations, and is the only association that represents the entire supply chain of
insured retirement strategies. IRI members are the major insurers, asset managers,
broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit
organization, IRI provides an objective forum for communication and education, and
advocates for the sustainable retirement solutions Americans need to help achieve a
secure and dignified retirement. Learn more at www.irionline.org.
©2018 IRI
All rights reserved. No part of this report may be reprinted or reproduced in any form or
used for any purpose other than educational without the express written consent of IRI.
1 Generation X and Retirement Readiness 2018
THEY’RE (MOSTLY) DOING IT WRONG
GENERATION X and
RETIREMENT READINESS
This year’s report is notable for the oldest GenXers
reaching age 55 – just 10 years from “traditional”
retirement age. Time is growing short for older
GenXers who haven’t adequately saved, and most
have some serious work to do to prepare for
retirement even if they happen to have substantial
savings. GenXers’ expectations are poorly aligned
with their financial resources, most haven’t created
a plan for how they’ll retire – and quite a few don’t
even know when they may be able to retire. Few have
a sufficient understanding of the income they’ll need
during retirement or how to generate that income
from their savings in a sustainable way. In short,
despite being mindful of the risks they face, such as
ever-increasing health care expenses, few have a plan
to manage these risks and successfully navigate their
retirement years. In these respects, this year’s report
mirrors the previous three, but this year’s report also
highlights the significantly higher levels of retirement
readiness and confidence displayed by GenXers who
forge relationships with financial advisors versus those
who go it alone.
This is the fourth report in IRI’s research series on the retirement preparedness of Generation
X, which began in 2011. Approximately every two years, members of Generation X (Americans
born between 1963 and 1982) are interviewed as to their overall financial condition, savings
levels and habits, the steps they have taken to prepare for retirement and the resources they
have engaged, and their expectations for retirement.
2Generation X and Retirement Readiness 2018
KEY FINDINGS.............................................................................
n Economic satisfaction is up slightly among
GenXers, with 67 percent feeling satisfied with
their lives from a financial standpoint versus
64 percent in 2016.
n Key financial indicators have improved in the
past two years. In the past 12 months:
• Only 25 percent of GenXers found it difficult
to pay mortgage or rent, down from 35
percent in 2016.
• Seven percent prematurely withdrew funds
from a retirement account, versus 13 percent
two years ago.
• Thirty percent increased their contributions
to a 401(k), IRI or similar plan, as compared
to 23 percent having done so in 2016.
n Seven in 10 GenXers have less than $5,000 in
an emergency fund; one-half have $1,000 or
less.
n Sixty-six percent have less than $5,000 in
credit card debt; four in 10 have $1,000 or less.
More than six in 10 GenXers expect to retire
debt-free.
n Six in 10 GenXers have money saved for
retirement. This is down from 65 percent two
years ago.
n Of those with retirement savings, seven in 10
have less than $250,000 saved, down from
eight in 10 in 2016. However, this shift is the
result of those with savings of $250,000 or
more nearly doubling, from 12 percent in
2016 to 23 percent in 2018.
n In 2016, 18 percent of GenXers with a financial
advisor had retirement savings of $250,000
or more. In 2018 this figure rose to 35 percent.
Conversely, 45 percent of GenXers who use
financial advisors have less than $150,000
saved, versus 64 percent of those who do
not use an advisor.
n One-half of GenXers rarely or never rebalance
their retirement accounts, or don’t know when
or whether they do so.
n Six in 10 GenXers believe private employers
should be legally required to offer a 401(k)
plan to employees, and a staggering 81 percent
would like to be offered an option to take a
portion of their retirement plan balance as
monthly, guaranteed lifetime income.
n Only one-third of GenXers have tried to
calculate how much they need to have saved
in order to retire. Of these, 57 percent have
considered health care costs in their calculations.
Of those that did not include health care costs,
the primary reason was not knowing how to
calculate them.
n Only 23 percent of GenXers think it is very
important to leave an inheritance for a child or
grandchild.
n Only 20 percent of GenXers have consulted a
financial advisor, down from 29 percent two
years ago. The topics they are most likely to
have discussed with an advisor are retirement
(82 percent) and investing (61 percent). More
than seven in 10 say their advisor has prepared
a written financial plan for them.
n Three in 10 GenXers plans to work past age 65,
with 21 percent planning to work until age 70 or
older. One in four do not know when they will
retire – this is up from 16 percent in 2016.
n Among the youngest GenXers (age 36-40),
54 percent expect 401(k) plans to be a major
source of retirement income, versus 31 percent
citing Social Security as a major source. For
the older GenXers (age 51-55), this is reversed,
with 47 percent citing Social Security as a major
source of retirement income and 32 percent
pointing to a 401(k).
n Nearly one-half of GenXers say they will
withdraw money from their retirement savings
as needed to pay for basic expenses during
retirement, versus 43 percent planning to take
monthly income following a written plan, and
17 percent who say they will use a portion to
purchase an annuity.
3 Generation X and Retirement Readiness 2018
n Only three in 10 GenXers who do not work
with financial advisors are very or somewhat
confident they will have enough money to live
comfortably in retirement, or that they did or
are doing a good job preparing for retirement,
versus eight in 10 of those that do work with
advisors.
n Saving enough to retire when, where, and
how they desire (60 percent), and incurring
significant medical expenses (58 percent) are
the top pre-retirement issues about which
GenXers are very or somewhat concerned.
n Despite their concerns regarding adequate
savings and managing expenses, and most
having either no savings or comparatively low
retirement account balances, 60 percent of
GenXers believe they will have enough money
in retirement to cover their basic expenses
and allow them to enjoy some (36 percent)
or extensive (24 percent) travel and leisure
activities.
n The top three retirement risks GenXers are
most concerned about are changes to Social
Security (66 percent), higher than expected
health care expenses (64 percent), and running
out of money (59 percent).
Each of the IRI generational research series looks at the overall level of satisfaction members of each cohort have
with their economic and financial well-being. It is useful to compare Boomers and GenXers, with the former on the
cusp of, or living in, retirement, and the latter largely in their prime earning years. GenXers, while not reporting being
as satisfied from an economic standpoint as they did in earlier studies, are significantly happier with how things are
going than Boomers. While this is not necessarily a “canary in the coal mine,” it is a useful trend to watch as Boomers
move further into their retirement years, and GenXers move inexorably closer.
76%
48%
55%
83%
64%67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2012 2016 2018
Figure1:EconomicSa;sfac;on
Boomers GenX
Figure 1: Economic Satisfaction
4Generation X and Retirement Readiness 2018
Members of Generation X seem to be enjoying some improvement in financial stability, with negative measures
retreating and positive ones gaining tractions. For example, Figure 2 shows that only one in four GenXers had
difficulty making mortgage or rent payments in the past 12 months, versus more than one in three two years ago.
The percentage of GenXers withdrawing funds from a 401(k) or IRA nearly halved, falling from 13 percent in 2016
to 7 percent this year. On the positive indicator side, 30 percent of GenXers increased their 401(k) and/or IRA
contributions in the past year, versus 23 percent reporting increases to contributions in the prior study.
Figures 3 and 4 are good news and not so good news. On the plus side, as Figure 3 shows GenXers claim to have
a pretty good handle on their revolving debt, with two-third of GenXers reporting credit card balances of less than
$5,000, and the majority of them owing less than $1,000. On the negative side, Figure 4 reveals that about the same
number have less than $5,000 in an emergency fund, with the majority having less than $1,000 set aside. These
measures are potentially linked, as a constricted ability to pay in cash for unexpected expenses can rapidly increase
credit card debt.
35%
13%
8%
7%
18%
23%
9%
18%
25%
7%
4%
7%
11%
30%
NotAskedIn2016
12%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Founditmoredifficulttopaymortageorrent
Prematurelywithdrewfundsfrom401(k),IRA,etc.
Tookafullwithdrawalfrom401(k)(notanIRIRollover)
OpenedanewIRIwithmoneyfroma401(k)orPension(IRARollover)
StoppedcontribuOngto401(k),IRA,etc.
IncreasedcontribuOonsto401(k),IRA,etc.
DecreasedcontribuOonsto401(k),IRA,etc.
PostponedplanstoreOre
Figure2:FinancialChangesinthePast12Months
2016 2018
Figure 2: Financial Changes in the Past 12 Months
5 Generation X and Retirement Readiness 2018
A concerning finding in this year’s GenX survey is the drop in respondents reporting that they have anything
at all saved for retirement. While GenXers are doing marginally better than Baby Boomers in this regard, only
54 percent of Boomers reporting having retirement savings in 2017, but with the drop from 65 percent to
60 percent GenXers are closing the gap, and not in a good way.
42%
24%
13%
10%
Figure3:CreditCardDebt
$1,000orLess $1,000-$5,000 $5,000-$10,000 $10,000-$25,000
Figure 3: Credit Card Debt
48%
24%
12%
7%
9%
Figure4:EmergencyFundBalance
$1,000orLess $1,000-$5,000 $5,000-$10,000 $10,000-$25,000 $25,000+
Figure 4: Emergency Fund Balance
6Generation X and Retirement Readiness 2018
However, among those GenXers that do have savings, balances are on the rise. Figure 6 reveals that in 2016,
69 percent of GenXers with retirement savings had total savings of less than $150,000. In 2018 this dropped to
59 percent, with increases in the numbers of those with higher balances. It is notable that the $150,000 to $250,000
range only increased from 10 percent to 12 percent, while a whopping 23 percent reported having retirement savings
of $250,000, nearly double the 12 percent reporting balances in this range two years ago. Two years of extraordinary
stock market returns, and as noted in Figure 2 increasing 401(k) and IRA contributions, have helped propel the
balances of many with retirement savings upward.
65%
60%
35%
40%
0% 10% 20% 30% 40% 50% 60% 70%
2016
2018
Figure5:HaveMoneySavedforRe>rement
Yes No
Figure 5: Have Money Saved for Retirement
69%
12%
12%
6%
59%
10%
23%
8%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Lessthan$150k
Between$150kand$250k
$250kormore
Don'tKnow
Figure6:AmountSavedforReIrement
2016 2018
Figure 6: Amount Saved for Retirement
7 Generation X and Retirement Readiness 2018
It is also instructive to take a look at how retirement savings balances compare between those who work with a
financial advisor and those who do not. Figure 7 shows a high degree of correlation between working with a financial
advisor and the accumulation of higher levels of retirement savings, and this relationship holds true for the current
study as well as for the study conducted in 2016. In both time periods, the percentage of GenXers working with an
advisor that have $250,000 or more in retirement savings is roughly double the percentage of those who do not
have an advisor: 18 percent versus 8 percent in 2016, and 35 percent versus 18 percent in 2018. Conversely, those
without advisors are more likely to have less than $150,000 in retirement savings in both years: 77 percent versus
43 percent in 2016, and 64 percent versus 45 percent in 2018. So while the rising tide has lifted all boats, GenXers
with financial advisors are apparently catching the bigger waves.
GenXers may need to engage more with their retirement accounts. Figure 8 shows that more than three quarters
of GenXers check their retirement account balances at least on a quarterly basis, and more than half check monthly.
Figure 9 does show that only one-third are rebalancing their retirement portfolios at least annually. However,
Figure 10 reveals that 47 percent of GenXers in general, and 66 percent of those with financial advisors, believe
their investable retirement assets are primarily held in balanced portfolios, which may be automatically rebalanced;
some of those with automatic rebalancing in place may have responded that they never rebalance or that they don’t
know, simply because they did not “do anything.” This is an area for further exploration and refinement in future
studies, for example ferreting out whether participants are continuously rebalancing back to a static model or altering
their allocations as they age.
43%
77%
45%
64%
25%
8%
15%
9%
18%
8%
35%
18%
5% 7% 5%10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
WithFinancialAdvisor WithoutFinancialAdvisor WithFinancialAdvisor WithoutFinancialAdvisor
2016 2016 2018 2018
Figure7:AmountSavedforReDrementWith/WithoutFinancialAdvisor
Lessthan$150k Between$150kand$250k $250kormore Don'tknow
Figure 7: Amount Saved for Retirement With/Without Financial Advisor
8Generation X and Retirement Readiness 2018
52%
26%
11%
11%
0% 10% 20% 30% 40% 50% 60%
Atleastmonthly
Quarterly
LessthanQuarterly
RarelyorNever
Figure8:FrequencyofCheckingReFrementAccountBalanceFigure 8: Frequency of Checking Retirement Account Balance
35%
15%
30%
13%
7%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Atleastannually
Onceeveryfewyears
Rarely
Never
Don'tknow
Figure9:FrequencyofReErementAccountRebalancingFigure 9: Frequency of Retirement Account Rebalancing
9 Generation X and Retirement Readiness 2018
Figure 10 also shows that very few GenXers report holding their retirement savings in target date funds. This is
curious given the popularity of such funds, both as plan options and as Qualified Default Investment Alternatives
(QDIAs). A 2016 survey by the Plan Sponsor Council of America and Principal Financial Group found that 76.9
percent of plans offered a target date fund in 2016, up from 70.3% in 2015. Further, target date funds accounted
for 85 percent of QDIAs in plans offering auto enrollment. It is quite possible that some, and perhaps many, GenXers
do not understand the difference between a balanced fund and a target date fund, and thus target date funds may
be in use by more GenXers than Figure 10 indicates.
Three quarters of GenXers with retirement savings contributed to their retirement accounts in the past 12 months.
24%
3%
47%
6%
20%
24%
1%
66%
4%
5%
25%
4%
39%
6%
26%
0% 10% 20% 30% 40% 50% 60% 70%
MostlyStocks/StockFunds
MostlyBonds/BondFunds
BalancedPor?olio
TargetDate/TargetRiskFunds
NotSure
Figure10:ReGrementAssets
All WithFA NoFA
Figure 10: Retirement Assets
75%
23%
2%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Yes
No
Don'tKnow
Figure11:ContributedtoReArementSavingsinPast12MonthsFigure 11: Contributed to Retirement Savings in Past 12 Months
10Generation X and Retirement Readiness 2018
Figure 12 and 13 show that GenXers are in favor of both a legal requirement for employers to offer 401(k) or similar
plans to their employees, and would like those plans to include an option that would allow them to take a portion of
their 401(k) balance as a guaranteed lifetime income annuity when they retire.
63%
37%
Figure12:ShouldPrivateEmployersbeLegallyObligatedtoOffer401(k)Plans?
Yes No
Figure 12: Should Private Employers be Legally Obligated to Offer 401(k) Plans?
81%
19%
Figure13:DesireOp2ontoTakePor2onof401(k)asGuaranteedLife2meRe2rementIncome
Yes No
Figure 13: Desire Option to Take Portion of 401(k) as Guaranteed Lifetime Retirement Income
11 Generation X and Retirement Readiness 2018
That more than eight in 10 GenXers want a guaranteed lifetime income option in their 401(k) plans is not
surprising given that most look to Social Security as their only source of income they can’t outlive during
retirement. In Figure 14, seven in 10 GenXers cite Social Security as their expected source for lifetime retirement
income, versus one-third expecting a pension from a private employer and fewer than one in five expecting a public
pension, such as retirement benefits from military service or government employment. Only 16 percent expect
income from an annuity; however, as noted in Figure 13, 81 percent would like to be able to use a portion of their
retirement savings to create guaranteed lifetime income. The primary difference between these two survey questions
is that one asked whether they want to be able to convert savings into income, while the other asks if they expect to
use an annuity. This phenomenon is explained in “The Language of Retirement,” a 2017 research study from IRI and
Jackson: when consumers are asked if they want guaranteed lifetime income, most hands go up. Mention annuity,
and the hands raised are far fewer. A clear opportunity for advisors to educate consumers.
Saving adequately for retirement is critical to ensuring that GenXers will be able to retire, and live with dignity in
retirement. Government has a key role to play in helping all generations save, and save more, by first doing no harm.
Figure 15 shows that reductions in the deductibility of retirement plan contributions or increases in taxes are more
likely to drive consumers to save less than to save more, while tax reductions are more likely to promote positive
savings behaviors. GenXers also want to know what their savings will mean to them when they retire, and this can
promote positive behaviors as well: four in 10 GenXers believe they would increase their retirement savings if they
were provided with estimates of the lifetime income their savings would produce when they retire.
69%
32%
18%
16%
13%
12%
0% 10% 20% 30% 40% 50% 60% 70% 80%
SocialSecurity
PrivatePension
PublicPension
Annuity
Disability
None
Figure14:ExpectedSourcesofGuaranteeLifeJmeIncomeFigure 14: Expected Sources of Guarantee Lifetime Income
12Generation X and Retirement Readiness 2018
When it comes to approaching retirement armed with information, GenXers fall short. Figure 16 shows that only
35 percent have tried to calculate the amount they need to have saved in order to retire, down from an already too
low 42 percent two years ago. This highlights the need for plan participants to receive estimates of the monthly
lifetime income their retirement savings will produce on their account statements. While not comprehensive or
tailored to individual situations, such illustrations would provide GenXers with a meaningful, useful gauge of their
progress. Paired with links to more robust planning tools, such illustrations would likely prompt more GenXers to
create savings targets, increase contributions, and seek advice from financial professionals.
26%
23%
42%
5%
25%
4%
4%
8%
3%
19%
17%
14%
51%
11%
30%
35%
37%
39%
0% 10% 20% 30% 40% 50% 60%
Elimina3onoftaxincen3ves
IncreaseinSocialSecurity payrolltax
Increaseinincometax
Decreaseinincometax
IncreaseinCapitalGainstax
IncreaseinIRAcontribu3onlimit
Increasein401(k)contribu3onlimit
Con3nuedlowinterestrates
Providedwithlife3meincomees3mates
Figure15:ImpactofGovernmentalChangesonDesire/AbilitytoSaveforRe3rement
LessLikelytoSave MoreLikelytoSave
Figure 15: Impact of Governmental Changes on Desire/Ability to Save for Retirement
42%
35%
58%
65%
0% 10% 20% 30% 40% 50% 60% 70%
2016
2018
Figure16:HaveCalculatedAmountNeededtoReAre
Yes No
Figure 16: Have Calculated Amount Needed to Retire
13 Generation X and Retirement Readiness 2018
Within the relatively small group of GenXers that have tried to calculate needed retirement savings, Figure 17 shows
that a decent number, 61 percent, have tried to consider health care costs in those calculations. Of course this should
be 100 percent, as health care will be a significant expense category for most people during their retirement years. In
2017 Fidelity estimated that a couple retiring that year would need an average of $275,000 (in 2017 dollars) to cover
medical expenses throughout retirement, up from $260,000 in 2016. This represents a 5.8 percent increase, more
than double the 2.5 percent increase in the Consumer Price Index for All Urban Consumers (CPI-U) in 2017.
Figure 18 further highlights the importance of including health care costs in retirement saving and income
calculations. GenXers may be underestimating how much of their income they’ll need to spend on health care.
Four in 10 GenXers believe health care expenses will consume 20 percent, or less, of their income in retirement.
However, data on household income and the out-of-pocket (OOP) expenses of Medicare recipient average
household heath care costs suggests the percentage of income spent on health care during retirement could be
higher, particularly for those with one or more chronic medical conditions.1,2
Table 1: Annual Health Care Costs as a Percentage of Income
Age 65-74 Median
Household Income
High Range Medicare
Recipient Annual Out-of-
Pocket (OOP) Expense
OOP Expense as a Percent
of Annual Income
Good Health $47,432 $7,620 16%
Diabetes $47,432 $10,200 22%
Congestive Heart Failure $47,432 $11,400 24%
Had a Heart Attached $47,432 $12,012+ 25%+
61%
57%
34%
35%
5%
8%
0% 10% 20% 30% 40% 50% 60% 70%
2016
2018
Figure17:Re4rementCalcula4onIncludesHealthCareCosts
Yes No Don'tknow
Figure 17: Retirement Calculation Includes Health Care Costs
14Generation X and Retirement Readiness 2018
So are the one-third of GenXers in Figure 18 estimating health care expenses between 21 and 30 percent correct?
Maybe, but with variability in the thousands of dollars per year estimating health care expenses is an important, and
personal, component of calculating how much one needs to save in order to retire. It can also be a complex exercise,
requiring a thorough knowledge of Medicare and supplemental medical insurance, and the potential financial impact
of health issues, making this an excellent area where financial advisors can provide substantial value to their clients.
Figure 19 emphasizes the need for professional assistance in estimating health care expenses: 60 percent of those
who did not include health care in their retirement calculations omitted them due to lack of knowledge as to costs
and/or how to perform the calculations.
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
20%orLess
21%to30%
31%to40%
Morethan40%
Figure18:Expecta=onofHealthCareCostsasaPercentageofRe=rementIncome
2016 2018
Figure 18: Expectation of Health Care Costs as a Percentage of Retirement Income
60%
26%
16%
9%
7%
8%
5%
6%
58%
39%
13%
10%
7%
6%
5%
8%
0% 10% 20% 30% 40% 50% 60% 70%
Unsureofcosts/don'tknowhowtocalculate
PlanningtorelyonMedicare
Planningtorelyonemployercoverage
Healthcareisnotapriority
PlanningtorelyontheAffordableCareAct
Includedingeneralfinancialmanagement
Advisorhasnotdiscussed
Don'tknow
Figure19:ReasonsforOmiSngHealthCareCostsfromReTrementCalculaTons
2016 2018
Figure 19: Reasons for Omitting Health Care Costs from Retirement Calculations
15 Generation X and Retirement Readiness 2018
Figure 20 reflects the sense GenXers have that they’re going to be needing their money, with only 23 percent saying
they think it is very important to leave an inheritance. This has potential implications for Millennials and Generation Z
workers – it might not be a good idea for them to include an inheritance as part of their retirement strategies!
There are several findings in this report that demonstrate either the need for, or the benefit of, engaging a financial
professional to help with navigating toward and through retirement. Unfortunately, only 20 percent of GenXers have
taken this step, down from 29 percent in 2016.
Figure 22 shows that for those that do have a relationship with a financial professional, retirement and investing
remain the top planning areas GenXers are discussing with their advisors. Eight in 10 have discussed retirement, and
six in 10 have discussed investing. New in this year’s report is cognitive decline, which only nine percent of GenXers
say they have discussed with their advisors. Especially for older GenXers, this is an important aspect of wealth
protection and should be integral to the planning process.
23%
33%
19%
20%
5%
0% 5% 10% 15% 20% 25% 30% 35%
Veryimportant
Somewhatimportant
Neutral
Notveryimportant
Notatallimportant
Figure20:ImportanceofLeavinganInheritanceFigure 20: Importance of Leaving an Inheritance
29%
20%
71%
80%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
2016
2018
Figure21:HaveConsultedaFinancialProfessional
Yes No
Figure 21: Have Consulted a Financial Professional
16Generation X and Retirement Readiness 2018
Reflecting the high incidence of retirement discussion, Figure 23 shows that 75 percent of GenXers with financial
advisors have had a written retirement plan prepared for them.
Many GenXers have aging parents, who may value their assistance in helping them make good financial, health and
other decisions during retirement. Figure 24 reveals that not too many GenXers are providing this type of assistance
to their parents, with health care and related issues like long-term care and end of life planning being the most likely
areas where GenXers are assisting their parents. This makes intuitive sense, as children tend to be involved in some
manner when a parent falls ill. Other areas, such as retirement planning and investing, may in many cases be more
awkward, and be areas where parents are uncomfortable sharing details with children, and vice-versa. However,
trusted family members having knowledge of financial affairs is a key aspect of protecting against poor financial
decision making, fraud, and elder abuse. This is another area where financial advisors can help, by encouraging and
facilitating the sharing of information and the implementation of processes to prevent financial mistakes and fraud,
such as alerts going to a family member, advisor, or trusted associate if there is unusual activity in an account.
81%
62%
45%
31%
27%
24%
82%
61%
47%
29%
27%
29%
9%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Re/rement
Inves/ng
Generalfinancialmanagement
Insurancecoverage
Taxplanning
Estateplanning
PlanningforCogni/veDecline
Figure22:PlanningAreasDiscussedwithFinancialProfessional
2016 2018
NotAskedIn2016
Figure 22: Planning Areas Discussed with Financial Professional
71%
75%
24%
22%
5%
3%
0% 10% 20% 30% 40% 50% 60% 70% 80%
2016
2018
Figure23:FinancialProfessionalHasPreparedaRe?rementPlan
Yes No Don'tknow
Figure 23: Financial Professional Has Prepared a Retirement Plan
17 Generation X and Retirement Readiness 2018
Figure 25 shows trends in the planned retirement ages of GenXers. The most significant change from 2016 is
the increase in GenXers that don’t know when they plan to retire. It’s tempting to assume that the “don’t know”
responders would be younger GenXers, but in fact the “don’t knows” are distributed fairly evenly across age groups,
with those in the middle (ages 41-50) being slightly more likely to say they don’t know when they will retire than the
youngest or the oldest. This greater uncertainty could be related to the “sandwich generation” status of the middle
group, with some of those GenXers caring for younger children or paying for college for older ones, at the same time
as they are caring for aging parents, creating greater uncertainty around the financial ability to retire.
19%
19%
20%
32%
23%
22%
15%
12%
15%
14%
27%
19%
20%
15%
0% 5% 10% 15% 20% 25% 30% 35%
Re-rementplanning
Inves-ng
Estateplanning
Healthcare
Longtermcare
Endoflifecare
Cogni-veimpairmentplanning
Figure24:AssistanceProvidedtoParentsorOtherFamilyMembers
2016 2018
Figure 24: Assistance Provided to Parents or Other Family Members
4%
8%
15%
22%
12%
24%
16%
5%
7%
14%
18%
9%
21%
25%
0% 5% 10% 15% 20% 25% 30%
Youngerthan50
Age50to59
Age60to64
Age65
Age66to69
Age70orolder
Don’tknow
Figure25:PlannedAgetoStopWorkingFull-Time
2016 2018
Figure 25: Planned Age to Stop Working Full-Time
18Generation X and Retirement Readiness 2018
When they retire, most GenXers plan to retire debt-free. Figure 26 shows that almost two-thirds of GenXers believe
they will retire without debt.
In Figure 27, the 38 percent of GenXers who expect to carry debt into retirement are most likely to continue paying
off mortgages and credit cards, with about one in four expecting to continue to making payments on asset-backed
debt such as car or boat loans.
62%
38%
Figure26:ExpecttoRe6reDebt-Free
Yes No
Figure 26: Expect to Retire Debt-Free
50%
27%
53%
11%
0% 10% 20% 30% 40% 50% 60%
Mortgage
Car,Boat,etc.
CreditCard
Other
Figure27:TypesofDebtCarriedIntoReIrementFigure 27: Types of Debt Carried Into Retirement
19 Generation X and Retirement Readiness 2018
Figure 28 breaks down expected sources of income for GenXers. Savings in an employer provided savings plan
such as a 401(k) are the most common source, with 42 percent of GenXers saying these accounts will be a major
source of income. Social Security is right behind with 36 percent saying it will be a major source. Other sources,
such as personal savings and traditional employer pensions, are less common among survey respondents, but no
less important to those who plan to depend on them.
45%
32%
26%
24%
24%
21%
19%
10%
8%
6%
42%
36%
25%
21%
23%
18%
22%
8%
8%
5%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Employersavingsplan,e.g.401(k)
SocialSecurity
Personalsavings
TradiFonalemployerpension
IRA
EmploymentinreFrement
Non-IRAinvestments(CDs,mutualfunds,etc.)
Saleorrefinancingofahome
Inheritance
Supportfromchildrenorfamily
Figure28:MajorExpectedSourcesofIncomeinReFrement
2016 2018
Figure 28: Major Expected Sources of Income in Retirement
...personal savings and traditional employer pensions,
are less common among survey respondents, but no
less important to those who plan to depend on them.
20Generation X and Retirement Readiness 2018
Figure 29 breaks down expected income sources between the oldest and youngest GenXers. Given media reports
about the looming insolvency of Social Security, it is not surprising that the oldest GenXers (age 51-55) are much
more likely to point to Social Security than the youngest (age 36-40), and conversely the youngest are more likely
to think of their 401(k) as their major source of retirement income.
In Figure 30, GenXers are most likely to select rate of return and guaranteed monthly income as either the most
important, or second most important, trait of a retirement investment. In comparison to 2016, rate of return was
selected by fewer survey respondents, while guaranteed monthly income was slightly more likely to be selected as
number one or number two.
54%
31%
29%
24%
24%
23%
25%
9%
9%
5%
32%
47%
23%
24%
19%
20%
22%
8%
7%
5%
0% 10% 20% 30% 40% 50% 60%
Employersavingsplan,e.g.401(k)
SocialSecurity
Personalsavings
TradiGonalemployerpension
IRA
EmploymentinreGrement
Non-IRAinvestments(CDs,mutualfunds,etc.)
Saleorrefinancingofahome
Inheritance
Supportfromchildrenorfamily
Figure29:MajorExpectedSourcesofReGrementIncome-Youngestv.OIdestGenXers
Age36-40 Age51-55
Figure 29: Major Expected Sources of Retirement Income - Youngest v. Oldest GenXers
27%
19%
22%
22%
13%
13%
7%
10%
23%
20%
23%
19%
11%
14%
6%
11%
0% 5% 10% 15% 20% 25% 30%
Rateofreturn
Guaranteedmonthlyincome
Growth
Security
Pastperformance
Cost
Recommendedbyadvisor
PrincipalpreservaEon
Figure30:ImportantTraitsofaReErementInvestment:RankedFirstorSecond
2016 2018
Figure 30: Important Traits of a Retirement Investment: Ranked First or Second
21 Generation X and Retirement Readiness 2018
Tax deferral is consistently ranked as an important aspect of retirement investments in IRI survey based research.
Figure 31 shows seven in 10 GenXers citing tax deferral as very or somewhat important.
Figure 32 is indicative of the need for GenXers to create plans for the efficient use of their retirement savings. More
GenXers plan to simply “withdraw as needed” than plan to use a written plan to take regular monthly income, and
fewer than one in five plan to use a portion of their 401(k) or IRA to purchase an annuity to provide guaranteed
lifetime income. This is an area where financial professionals can help tremendously, creating sustainable retirement
income plans, including annuities, to help ensures retirees don’t outlive their savings.
33%
44%
9%
3%
11%
30%
41%
8%
3%
18%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Veryimportant
Somewhatimportant
Notveryimportant
Notatallimportant
Don'tknow
Figure31:ImportanceofTaxDeferralasaReJrementInvestmentTrait
2016 2018
Figure 31: Importance of Tax Deferral as a Retirement Investment Trait
43%
47%
13%
17%
17%
15%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
TakeMonthlyIncomePerWri<enPlan
WithdrawasNeededforBasicExpenses
WithdrawOnlyforDiscreHonaryExpenses
UseaPorHontoPurchaseanAnnuity
EmergencyUseOnly
Don'tKnow
Figure32:PlansforUsing401(k)/IRAReHrementSavingsFigure 32: Plans for Using 401(k)/IRA Retirement Savings
22Generation X and Retirement Readiness 2018
Figure 33 reveals the anxiety GenXers have about their ability to successfully navigate their retirement years. Only
four in 10 GenXers are confident they will have enough money to live comfortably in retirement, and only 14 percent
say they are very confident. Similarly, most GenXers don’t believe they’ve done a good job preparing financially for
retirement, or that they will be able to manage health care and long-term care expenses. Interestingly, GenXers are
the most confident in their ability to meet their basic expenses during retirement, but given their concern in the others
areas this may be wishful thinking, or an expectation that Social Security will provide enough income for basic needs.
14%
13%
24%
12%
10%
9%
11%
28%
25%
34%
29%
21%
17%
16%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Willhaveenoughmoneytolivecomfortablyinre?rement
Doing/didagoodjobpreparing financiallyforre?rement
Willhaveenoughmoneyfor basicexpensesduringre?rement
Willhaveenoughmoneyfor medicalexpensesduringre?rement
Willhaveenoughmoneyforlong-termcareexpensesduringre?rement
Willhaveenoughmoneyforlong-termcareexpensesforparents
Willhaveenoughmoneyforhighereduca?onexpensesforchildren
Figure33:ConfidenceinRe?rementPreparedness
VeryConfident SomewhatConfident
Figure 33: Confidence in Retirement Preparedness
...most GenXers don’t believe they’ve done a good job
preparing financial for retirement, or that they will be
able to manage health care and long term care expenses.
23 Generation X and Retirement Readiness 2018
Figure 34 shows a very different perception among GenXers who work with financial advisors. Across the board,
GenXers with advisors are more confident that they are, or will be, prepared for retirement.
78%
77%
87%
74%
63%
53%
51%
34%
28%
51%
32%
24%
19%
21%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Willhaveenoughmoneytolivecomfortablyinre?rement
Doing/didagoodjobpreparing financiallyforre?rement
Willhaveenoughmoneyfor basicexpensesduringre?rement
Willhaveenoughmoneyfor medicalexpensesduringre?rement
Willhaveenoughmoneyforlong-termcareexpensesduringre?rement
Willhaveenoughmoneyforlong-termcareexpensesforparents
Willhaveenoughmoneyforhighereduca?onexpensesforchildren
Figure34:Very/SomewhatConfidentinRe?rementPreparedeness-With/WithoutAFinancialAdvisor
WithFA WithoutFA
Figure 34: Very/Somewhat Confident in Retirement Preparedness - With/Without A Financial Advisor
24Generation X and Retirement Readiness 2018
GenXers top concerns in the present mirror their concerns about retirement and retirement planning. Figure 35 shows
six in 10 GenXers are concerned about their ability to save enough to realize their vision of retirement, and the possibility
of incurring significant medical expenses. Other concerns, such as paying for basic living expenses, paying off debt and
losing employment are definitely on their radar but don’t loom as large.
27%
22%
20%
18%
17%
12%
12%
9%
8%
8%
33%
36%
24%
23%
24%
16%
18%
19%
16%
16%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Savingenoughtore9rewhen, where,andhowdesired
Significantmedicalexpenses
Basiclivingexpenses
Payingoffdebt
Lossoffull-9meemployment
Payingoffamortgage
Payingforchidren'seduca9on
Stock/bondmarketlosses
Suppor9ngchildreninadulthood
Suppor9ngparents
Figure35:Pre-Re9rementFinancialConcerns
VeryConcerned SomewhatConcerned
Figure 35: Pre-Retirement Financial Concerns
25 Generation X and Retirement Readiness 2018
Figure 36 indicates that six in 10 GenXers believe they will need more than $45,000 in annual income, in today’s
dollars, during retirement, and three in 10 think they will need more than $75,000. The average monthly Social
Security benefit in January, 2018 was $1,404.3 A married couple in retirement, both receiving the average benefit,
would be drawing $33,696 in annual Social Security benefits. Assuming no additional income from a public or private
pension, savings of $1,032,600 would be required to generated the additional $41,304 needed to reach $75,000 in
total annual income, assuming a 4% withdrawal rate. Alternatively, an immediate annuity providing $41,304 in annual
lifetime income for a 65-year-old married couple would cost approximately $745,000. In either case, current savings
levels for most GenXers fall far short of what would be required to generate the income they think they need, again
highlighting the need to calculate goals and create plans.
3%
8%
12%
13%
16%
12%
12%
24%
5%
9%
12%
14%
13%
9%
8%
29%
0% 5% 10% 15% 20% 25% 30% 35%
$15,000orless
Between$15,000and$25,000
Between$25,000and$35,000
Between$35,000and$45,000
Between$45,000and$55,000
Between$55,000and$65,000
Between$65,000and$75,000
Morethan$75,000
Figure36:AnBcipatedReBrementIncomeNeed
2016 2018
Figure 36: Anticipated Retirement Income Need
Current savings levels for most GenXers fall far short of
what would be required to generate the income they think
they need.
26Generation X and Retirement Readiness 2018
Figure 37 highlights the disconnect between savings levels, potential income sources, financial concerns and lifestyle
expectations. Six in 10 GenXers believe they will have enough income during retirement to pay for their basic
expenses, and enjoy at least some travel and leisure. While the number of GenXers with higher levels of savings has
increased in the past two years, most will be challenged to realize these lifestyle expectations without growing their
retirement savings significantly; fortunately, they have time to do so.
Figure 38 explores GenXers’ level of concern about various negative events that could potentially occur during their
retirement years. No doubt fueled by the volume of press coverage regarding its projected insolvency, changes to
Social Security are their number one concern, with almost seven in 10 saying they are concerned changes could
occur that would affect the income they receive. This is followed closely by higher than expected medical costs
(64 percent) and running out of money (59 percent). Only one in four is concerned about becoming a victim of
elder abuse, despite the growth in reported cases.
24%
36%
10%
17%
13%
0% 5% 10% 15% 20% 25% 30% 35% 40%
BasicExpenses,ExtensiveTravel/Leisure
BasicExpenses,SomeTravel/Leisure
BasicExpenses,LiAleorNoTravel/Leisure
Very/SomewhatWorriedAboutBasicExpenses
Don’tKnow
Figure37:LifestyleandBudgetExpectaSonsinReSrementFigure 37: Lifestyle and Budget Expectations in Retirement
66%
64%
59%
53%
48%
43%
42%
41%
35%
33%
32%
27%
25%
12%
0% 10% 20% 30% 40% 50% 60% 70%
ChangestoSocialSecurity
Higherthanexpectedmedicalcosts
Runningoutofmoney
Inabilitytoliveindependently
AboveaverageinflaIon
PoorfinancialdecisionsduetocogniIvedecline
Notenoughmoneyforbasicexpenses
Needingfinancialhelpfromfamily/friends
Unabletopayrent
Significantinvestmentlosses
Missingoutoninvestmentgains
Unabletoleavemoneytoheirs
VicImofelderabuse
Dyingwithalargeamountofmoney
Figure38:ReIrementFears(Very/SomewhatConcerned)Figure 38: Retirement Fears (Very/Somewhat Concerned)
27 Generation X and Retirement Readiness 2018
Finally, Figure 39 reveals what GenXers think they will do if they run out of money during retirement. Most believe
they will either downsize so they can survive on Social Security alone, or return to work. Neither may be a viable
option – it’s easier to talk about downsizing in the abstract than to do it, and returning to work requires both the
opportunity, and the physical and mental capacity, to do so. These are more hope than strategy, and the eventuality
of either may be avoided with a solid retirement plan.
52%
51%
21%
14%
9%
7%
2%
0% 10% 20% 30% 40% 50% 60%
DownsizetoliveonSocialSecurity
Returntoworkifable
Don'tknow
Seekassistancefromchurchorsocialservices
Relyonfamily/friends
Relyonchildren
Other
Figure39:DealingwithExhausLngFinancialResourcesinReLrementFigure 39: Dealing with Exhausting Financial Resources in Retirement
28Generation X and Retirement Readiness 2018
METHODOLOGY........................................................................ Methodology: This report is based on an online survey
conducted by Woelfel Research, Inc. A total of 802
respondents completed the survey between February
1, 2018 and February 4, 2018. Survey respondents
were Americans ages 36 to 55, and the results
were weighted by age and gender to the 2012-2016
American Community Survey. The margin of error for
the survey was +/-3.5% at the 95% confidence level.
SUMMARY..................................................................................... Summary: Most of Generation X is on shaky ground
with regard to retirement readiness and awareness.
Many have no savings, and those that do have a long
way to go to reach savings levels that will support
their retirement income and lifestyle expectations.
Expectations which, in most cases, are little more than
wishful thinking, as relatively few have a formal plan
for how to get to and through retirement, or even a
savings goal to get started. And despite expectations
of a retirement lifestyle that covers the basics and also
allows for travel and leisure, they are concerned about
both their income and expenses, fearing changes to
Social Security, unexpected or higher than expected
health care expenses, and running out of money
during retirement. GenXers who have worked with
a financial professional, setting financial goals and
developing a retirement plan, have saved significantly
more and are far more confident that they’ll enjoy a
successful, well-funded retirement.
1 “The Financial Future of Social Security and
Medicare,” (Shaw and Rametta, 2017)
2 “National Health Expenditure Projections, 2016–25:
Price Increases, Aging Push Sector To 20 Percent
of Economy,” (Centers for Medicare and Medicaid
Services, 2017)
3 Social Security Administration
Insured Retirement Institute
202-469-3000 | 202-469-3030 (fax)
[email protected] | myirionline.org
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