The generation closest to the traditional retirement age may also need the most advice, according to two new surveys.
It may not be surprising that a BankRate survey of more than 2,500 Americans found that more than half (58%) feel they are behind in their retirement savings either slightly (21%) or significantly (37%). What comes across more starkly is that Generation X, or people in the age range of about 45 to 60 in 2025, are far less likely to feel confident than the average person, with 69% saying they are slightly behind (22%) or significantly behind (47%) the mark.
“As much as any age group, Generation X is caught in something akin to a financial squeeze,” said Mark Hamrick, Bankrate senior economic analyst. “They are managing their many obligations, including debt, even as urgency grows and the time for saving for retirement shrinks.”
A survey by Cerulli Associates found similar results for the so-called “sandwich generation.” When the Boston-based consultancy asked how confident people were in maintaining their current standard of living in retirement, Generation X once again looked rough, with only 19% saying they feel very confident, 50% saying they are somewhat confident, and 31% saying they are not confident.
Cerulli’s researchers noted that some of Generation X’s lack of confidence may be because they are closer to retirement and, therefore, more prone to feeling nervous about it. However, they also found that two-thirds of Gen X 401(k) participants have less than $100,000 in individual retirement assets.
“It is not surprising that many do not feel they will be able to maintain their standard of living in retirement,” Cerulli noted.
That also fits with Bankrate’s analysis, which found that only 13% of Gen Xers think they can live on less than $250,000 in retirement. The majority, or 60%, believe they need between $250,000 and $500,000.
As Cerulli went on to note, the situation could get trickier if there is a market downturn in the near future.
“With five to 20 years until retirement, depending on their age, members of this generation are entering a critical window in which a sustained bear market or recession could have a significant impact on when they retire and with how much,” Cerulli wrote.
Bankrate’s Hamrick was not all doom and gloom about Gen X’s future. He said continuing to take advantage of investing’s compounding returns can put people in a better position in just a few years. In addition, people can utilitize catch-up contributions in tax-advantaged savings plans if they can spare the extra money.
Then, of course, there’s simply working longer.
“Extending one’s working years, boosting income and savings, while waiting to draw upon retirement savings, can have a positive, double-edged impact on their financial security,” he said.
Likewise, if a person can delay Social Security withdrawals, which are greater the longer you can hold off, “that’s probably under-appreciated and under-utilized, but it can have a quantifiable beneficial impact by boosting one’s benefit down the road.”
Bankrate, a New York-based financial guidance website, also recommended that people work with a financial advisor. Cerulli found, however, that many Gen Xers are not doing that even at this later stage of their financial lives.
“The majority (58%) of Gen Xers are approaching this critical period without an advisor to help them plan for retirement, and nearly half do not feel qualified to choose their own retirement investments,” the firm wrote.
Among those 58% who are not working with an advisor, 32% say the fees are not worth it, and 29% say they don’t know how to find a good advisor.
Elizabeth Chiffer, a research analyst with Cerulli, positions these percentages as an opportunity for both the record keepers holding the retirement savings assets and advisors interested in serving these individuals, especially since 65% of Gen Xers without an advisor rely on their retirement plan record keeper or employer as their main source for retirement planning.
“An opportunity exists for both record keepers and advisors to engage with participants, identify their needs, and make them aware of how they can access help with planning and investment advice,” Chiffer said in a statement.
In the RIA space, many financial advisors have asset thresholds for clients and are focused on the high-net-worth category. Cerulli believes, however, that advisors who work with record keepers to connect with these clients have a strong organic growth opportunity that would include wealth management along with other adjacent services.
“Record keepers and advisors, if they are not already doing so, should be taking steps to provide this participant cohort with advice and guidance to help them navigate questions about asset allocation, tax planning, claiming Social Security, and how to use their retirement savings best once they leave the workforce,” the consultancy wrote.
The firm offers similar advice regarding advisors reaching the younger Millennial and Gen Z populations.
“Engaging these two groups early provides record keepers and advisors with an opportunity to become a trusted source of advice for when these clients’ wealth grows, putting them in a prime position to retain and consolidate assets,” the firm wrote.
However, it also takes meeting this younger cohort in a way that they respond to. Areas such as addressing student debt, having emergency savings and household budgeting resonate with these groups.
The wealth management industry is continuing to work through how exactly to convert retirement plan participants to wealth clients. Some mega-RIAs, such as Creative Planning, Mariner and Captrust have brought together large client bases across individual wealth and retirement assets. Meanwhile, record keepers such as Fidelity and Empower both refer out clients to financial advisors, while also seeking to provide wealth management to participants who want their services.
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