Retirement readiness crisis: Gen X and boomers fall short on savings

The oldest members of Gen X will turn 60 next year, and along with boomers, many will be thinking about retirement soon. While many financial experts recommend saving approximately 10 times an annual salary before retiring, a new study shared by Northwestern Mutual found that the majority of Gen X Americans say their retirement savings are just three times their annual salary or less. 

Despite this, nearly 60% of boomers and Gen X employees who are not yet retired say they anticipate their monthly income in retirement will need to be the same or more than their current monthly income in order to retire comfortably. 

Based on this assessment, the majority of both Gen X’ers and boomers who are not yet retired say they do not think they will be financially ready for retirement when the time comes – representing the lowest confidence reported among any generation. 

The study found that only 11% of Gen X and 31% of boomers say they have saved the often recommended, 10 times or more of their current annual salary for retirement. 

“For millions of Gen X’ers who are fast approaching 60, the difference between retiring on time and feeling comfortable or working longer and lowering retirement expectations will come down to financial planning,” said Kamilah Williams-Kemp, chief product officer at Northwestern Mutual. “It’s never too late to take action, but the challenge and the stakes rise the longer people wait.” 

In addition to not feeling financially prepared for retirement, the study revealed that 70% of adults who live to age 65 will experience a long-term care event during their lifetime, such as dementia, a stroke or heart attack, diabetes or a serious fall. As Gen X and boomers continue to age, the financial risks associated with long-term health events increase. 

Many boomers and Gen X’ers are also concerned about the possibility of needing to provide care for a loved one as well. The study found that 36% of boomers and 56% of Gen X believe it is likely, or highly likely, that they will need to help provide long-term care for a loved one at some point. 

According to the study, boomers are particularly aware of these concerns and rank anxieties around being able to afford long-term care among their top three burning retirement questions — the only generation to rank the risk so highly. 

Related: Retirement un-readiness: Americans ‘concerned’ about outliving their assets

Additionally, over 30% of boomers said they question how much money they will need to retire comfortably as well as if it’s possible to outlive their savings. 

Other concerns shared by boomers and Gen X’ers include how taxes and inflation might impact retirement, how they should budget for health care expenses, and if social security will be there when they reach qualification. 

Despite the widespread awareness of the possibility of long-term care events and the financial risks associated with them, far fewer older Americans say they have prepared for the prospect of needing to provide care for themselves or a loved one, according to the study. 

Only 36% of Gen X and 40% of boomers say they are financially prepared for the possibility of needing to provide long-term care for themselves and only about 30% of boomers and Gen X’ers are prepared to support a loved one in need. 

“A sound financial plan should help people to do two things: build wealth and protect what they’ve already created. Without accounting for long-term care, people are left vulnerable to risk that’s real and significant. On the other hand, planning in advance for a long-term care event is the best way to ensure that someone’s wishes to age gracefully are followed and funded,” said Williams-Kemp. “Addressing long-term care in a comprehensive financial plan is also the best way to ensure that the financial burden of a life event is not passed along to the next generation.”