The 401(k) system will face its first test in a just a few years, when the oldest members of Gen X hit retirement age — and so far, things are not looking good.
Gen Xers, who were the first generation strongly affected by the shift from traditional pensions to defined-contribution plans, have far too little saved on average in 401(k)s and individual retirement accounts, according to a report Wednesday from the National Institute on Retirement Security. In many cases, those workers were thrown into the new system well before advances such as automatic enrollment, diversified default investment options and annual contribution escalations made 401(k)s more user-friendly.
As a result, Gen Xers are on track to have less saved for retirement than millennials and Gen Zers.
The “typical” Gen X household currently has about $40,000 in retirement savings, NIRS found — but that figure, while low, is far from telling the complete story.
The average retirement account balance among Xers is just under $130,000, but the median amount is only $10,000, according to the report. That’s largely the result of about 40% of Xers having no assets in retirement accounts.
“These numbers should be alarming to anyone concerned about retirement security, because they indicate that many Gen Xers will not be able to maintain their current standards of living in retirement,” the authors of the report noted. “This not only has personal costs but may have societal costs as well.”
Working longer or having phased retirements, potentially with part-time second careers, is a likely result — and one that many workers now expect.
That will also more likely affect middle- and low-income workers, who have smaller account balances. Some retirement industry
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