Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Cyril Tuohy
Many members of Generation X, the oldest of whom will be turning 50 next year, took huge hits to their incomes during the Great Recession and are only now beginning to recover — generally by putting off until tomorrow what they should be doing today.
A new survey by the Transamerica Center for Retirement Studies has found that as much as 12 percent of the Generation X workforce was laid off during the recession, 25 percent had work hours or wages reduced and 4 percent lost their homes.
Only 12 percent of Gen Xers who participated in the survey said they have fully recovered from the recession, with 57 percent saying they are still recovering from the deepest economic setback since the Great Depression of 1929.
Not surprisingly, the income losses have delayed many Gen Xers’ retirement plans and schedules, the survey found.
Only 24 percent of Gen Xers said saving for retirement was their greatest financial priority. The survey also found that 48 percent of them are focused on current needs such as paying off debt or covering basic living expenses.
“Most Generation X workers are currently saving for retirement but many are not saving enough,” Catherine Collinson, president of the Transamerica Center for Retirement Studies, said in a news release. “Finding the extra income to save may be extremely difficult. However, it is a worthy challenge that can make or break a comfortable retirement.”
Gen Xers were born between 1965 and 1978, and demographers estimate about 46 million of them live in the United States.
In some ways, Gen Xers are being short-changed. They are the first generation that will rely almost exclusively on defined contribution retirement plans like 401(k)s. When Generation Xers entered the workforce in the late 1980s and early 1990s, those plans were still in their infancy and many young workers weren’t conscious of the momentous shift underway from the defined benefit to the defined contribution model.
In previous surveys, some Gen Xers admitted that they will not do as well as their parents, the baby boomers.
In other ways, Gen Xers have only themselves to blame for their retirement woes, either because of procrastination or because easy consumer credit has turned them into perennial debtors.
The Transamerica survey found that 39 percent of Generation X workers prefer not to think about retirement until they get closer to it — by which time, of course, it will be too late for many of them to amass sufficient savings to support them throughout their retirement years.
Half of the respondents who provided an estimate of their retirement savings needs indicated that they guessed what that number should be, while 21 percent estimated their savings need based on current living expenses and 12 percent used a retirement calculator, the survey found.
The survey found that 54 percent of Gen Xers plan to work past the age of 65 or have no plans to retire.
“Working longer and delaying retirement is an effective way to help bridge retirement savings shortfalls,” Collinson said.
But to find decent jobs, she said, Gen- Xers will need to keep their skills current and “in step with employers’ needs.”
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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