Gen X is the 401(k) 'experiment generation.' Here's how that's playing out.


Generation X has been the alpha tester for the 401(k) retirement system, and the gloomy results are rolling in.

Nearly half of Gen Xers say their retirement savings are behind schedule, according to the newly released Goldman Sachs Retirement Survey.

“Many Gen Xers got a late start transitioning to 401(k) plans and struggled to catch up,” Chris Ceder, a senior retirement strategist with Goldman Sachs Asset Management, told Yahoo Finance.

Even now, half haven’t calculated how much total retirement savings they’ll need, how to save and invest to achieve that goal, or when they can afford to retire.

That’s significant as the oldest in this cohort will turn 60 next year.

Read more: How much money should I have saved by 50?

In many ways, Gen X — those born between 1965 and 1980 — has led our nation’s experiment in the shift away from a pension system to a 401(k) system, requiring individuals to save and prepare for their own retirement.

“They are the first generation to rely primarily on their own individual savings through 401(k)-like plans, and therefore, we refer to them as the ‘401(k) experiment’ generation,” Ceder said.

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Gen X is the first generation to rely primarily on their own individual savings through 401(k)-like plans. (Getty Creative) (Delmaine Donson via Getty Images)

More than two decades ago, many employers began doing away with traditional defined-benefit pensions and switching to 401(k) retirement plans that workers contributed to themselves with a pocket-sized match in funds from the employer.

While pensions are still the norm for public-sector state and municipal employers, they have all but vanished in the private sector.

Today, just 11% of private employers offer pensions, compared with 35% in the early ’90s. More than half of private-sector employees have a 401(k) plan, according to the Bureau of Labor Statistics.

What’s behind Gen Xers’ sluggish savings rate? Credit card debt and existing loans, particularly student loans, plus financially supporting family members, the survey found.

And a big concern is that they may retire earlier than expected.

People often retire for reasons beyond their control, such as health needs, caregiving, and job loss, Ceder said.

“We are starting to see Gen Xers retiring early, and, in many cases, for these same reasons. Retiring early sounds great, but to the extent people are not financially ready, it can have a major impact on the following decades in retirement,” he said.

The reality for Gen X has increasingly been noted in financial industry reports. For instance, Gen Xers say they will need, on average, $1.56 million in savings to retire comfortably, but to date, they have saved only an average of $109,600. More than 1 in 3 Gen X workers have dipped into their savings or taken out a loan to pay for monthly bills.

Source: Goldman Sachs Retirement Survey and Insights Report

Source: Goldman Sachs Retirement Survey and Insights Report (Goldman Sachs Retirement Survey and Insights Report)

Employers could help them catch up by providing professional financial planning and advice services, an emergency savings account feature, and a guaranteed income option for their retirement plan holdings, according to the Goldman report.

We have learned from this generation’s experience with saving challenges, competing priorities, the impact of plan defaults, financial education, and more,” Ceder said.

The generations following this cohort are reaping the benefits, with more plans now offering improved options. These include auto-enrollment, professionally managed portfolios or target-date funds as plan default options, and, most recently, auto-portability, he added.

Automatic enrollment and the emergence of target-date funds are undoubtedly changing retirement planning for younger workers. According to Vanguard recordkeeping data, in 2006, 11% of plans offered automatic enrollment, but by the end of 2021, half had adopted the feature, and about three-quarters of Generation Z and millennials were in plans with automatic enrollment.

Millennials, those born between 1981 and 1996, are most likely to report their retirement savings are on track or ahead of schedule (69%), and only 28% believe they are behind schedule, according to the Goldman report.

Baby boomers who are still working are also feeling the heat. Roughly half feel they’re behind in having enough to retire comfortably, worried about the cost of healthcare in the future, and hence are retiring later than prior retirees.

Half of baby boomers also plan to work part time in retirement as a financial safety net, much higher than Gen X and millennials.

Read more: Retirement planning: A step-by-step guide

One happy young mixed race woman feeling rich and successful while throwing money at home. Excited hispanic celebrating after saving and budgeting finances. Planning for the future or win a lottery

Gen Zers — born between 1997 and 2012 — are already planning for a considerably earlier retirement than the preceding generations, according to a new Goldman Sachs Asset Management report. (Getty Creative) (PeopleImages via Getty Images)

Gen Zers — born between 1997 and 2012 — are already planning for a far earlier retirement than the preceding generations.

They might be right. Many are off to a good start, with median retirement savings of around $29,000, according to Goldman.

That, however, doesn’t change the playing field for the Gen X cohort. Time is of the essence — Gen Xers are in the second half of their career.

“Retirement income, longevity risk, and healthcare spending in retirement will be just some of the next challenges this generation will face,” Ceder said.

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.

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