Generation X: A new and evolving vision of retirement

Results from the Ameriprise Financial Retirement 2.0SM study

Key Points

  • Gen Xers plan to stay active and keep working well into their 60s.
  • Uncertainty about pensions and Social Security has given Gen Xers a pragmatic focus on retirement savings.
  • They feel prepared for retirement, but as with all other generations today, they’re worried about health care.

In many ways, Generation X has been overshadowed by the media’s focus on Baby Boomers and Millennials. But as Gen Xers, those born between 1965 and 1980, are starting to enter into their 50's — it's an ideal time to take a closer look at their relationship to retirement.

Here are some of the questions the Ameriprise Retirement 2.0 study set out to uncover.

  • How do members of Generation X envision retirement?
  • How ready are they for it?
  • What are their top concerns?

Key finding 1: Gen Xers view retirement as an evolution

The “traditional” ideas of living in a retirement community, moving to a warm-weather climate and caring for family hold less appeal for Gen Xers. While they might only work part-time or do consulting, they want to stay in the game.

  • 73% don't intend to stop working all at once in retirement.
  • 46% plan to remain employed at least into their mid 60s.

Key finding 2: Gen Xers value physical and intellectual stimulation

  • Half envision staying fit in retirement.
  • Staying mentally invigorated and socially connected is their top reason for wanting to remain in the workforce.
  • 23% wish to further their education in retirement.
Top items for retirement

Key finding 3: Gen Xers have redefined their approach to retirement planning.

 

Pragmatic, optimistic-and uncertain?

Generation X is the first to come of age with 401(k) accounts as their primary retirement vehicle. That’s an important factor in their approach to retirement planning. Previous generations had largely relied on traditional pension plans. As those began to disappear, however, Gen Xers took notice.

  • Nine out of 10 (92%) report they are currently saving for retirement through an employer-sponsored 401(k) or an IRA.
  • They’ve also learned to save early, and are using time to their advantage. Nearly three-quarters (74%) were saving for retirement in their teens and 20s.
  •  77% are preparing to save enough money to afford the lifestyle they want in retirement.
Top items for retirement

One possible reason why? Uncertainty.

Previous generations had the safety net of pensions and Social Security. But Gen Xers are reluctant to count on either; the former was going away, and the latter was not on a track for sustainability. Evidence of that emerges in the Retirement 2.0 study, as 62% of respondents are concerned they won’t be able to rely on Social Security.

Key finding 4: Health and elder care emerge as top concerns

  • Health care is the most prominent worry, with 75% concerned about high costs in retirement.
  • 63% are worried about the cost of long-term care.
  • 60% are uneasy about relying on Medicare.
  • The costs of taking care of their parents — both financial and emotional — also weigh heavily on Gen Xers. Two in 10 currently have an older relative living with them or expect to in the future, and 46% are concerned about elder care.

Unique vision, unique needs

“Generation X is fundamentally redefining the concept of retirement,” says Marcy Keckler, CRPC®, CFP®, Vice President, Advice Strategy & Programs. “They clearly want to feel in control of their futures. At the same time, however, they should consider all of the financial planning tools and options available to them.”

For instance, Keckler explains, that can include maximizing 401(k) contributions and taking full advantage of employer matches. “Another possibility to consider is the ‘catch-up provision,’” she adds. “Once you hit age 50, you can make extra contributions to your 401(k) or IRA, allowing you to optimize these tax-advantaged accounts.”

Finally, given Gen Xers’ concerns about health and elder care, it could also pay for them to explore long-term care coverage options well in advance of retirement.

An Ameriprise financial advisor can help individuals work through those sorts of financial decisions and understand how to plan for the challenges and opportunities ahead.