Generation X seems to have gotten the message about how important it is to save for retirement, and to start early, an Ameriprise Financial survey finds.
Seventy-seven percent of Gen Xers believe they are saving enough to afford the kind of lifestyle they want in retirement. Nearly eight in ten (79%) are saving through a 401(k) retirement plan, and 69% are investing in an individual retirement account (IRA).
The average age at which Gen Xers started saving for retirement is 26. More than four in 10 (42%) expect to rely on their 401(k) accounts or IRAs (29%) as their main sources of income during retirement, with only 14% expecting to rely mostly on pensions and just 5% on Social Security.
“Having grown up in a different era than their parents and seeing how the landscape has changed, Gen Xers aren’t counting on pensions or Social Security to fund their retirement,” says Marcy Keckler, vice president of financial advice strategy at Ameriprise. “Instead, they’re taking matters into their own hands. They are setting aside money and investing now, while time is still on their side and they’re entering their peak earning years.”
However, they have some anxieties. A full 75% worry about the rising cost of health care, and 63% fear they could be burdened by the cost of long-term care.
This is why it is important for plan sponsors and advisers to work with Gen Xers, Keckler tells PLANSPONSOR. “They do have some concerns,” she says. They are troubled about the rising cost of health care and the medical expenses they will face in caring for their aging parents, she says. Nearly one-quarter (22%) are also uneasy about having to support adult children. That’s why “financial advisers need to work holistically with Gen X clients, taking a broad look at their entire financial picture,” Keckler says.
NEXT: A different view of retirement.
Nearly three-quarters (73%) of Gen Xers plan to continue working after they retire, but 90% expect to be working in a different capacity than they are now, saying they will look for a job that is less stressful and more rewarding.
Ninety percent say they foresee their retirement taking a different approach than a “traditional” retirement. Eighty percent expect to travel, 64% want to spend time relaxing, 50% plan to exercise, 50% hope to pursue hobbies, 48% plan to spend time with grandkids and family members, and 36% plan to seek out socially meaningful volunteer work.
To help participants prepare for that future, advisers should also work with plan sponsors to ensure that Gen Xers’ deferrals are automatically increased, Keckler says. Given that this group started early, they may have been defaulted at a low rate and can now afford to invest more, she says.
In addition, Gen Xers’ asset allocation might need changing if it has never been revisited. Finally, with the oldest members of Generation X turning 50 this year, sponsors can educate them about the catch-up provisions for which they now qualify.
“The new reality is that Gen Xers are planning to reinvent retirement. They don’t have an on/off switch in terms of leaving the work force and instead anticipate a gradual evolution into this new phase of life, which really sets this generation apart,” Keckler says. “Working with a financial adviser to develop a personal plan is an excellent approach for Gen Xers and provides reassurance as they balance their needs today with their future financial security in retirement.”
Ameriprise’s findings are based on a survey of more than 1,500 Americans between the ages of 35 and 50 with investable assets of $100,000 or more. The full findings can be viewed here.