Retirement Readiness for Generation X

It is easy to find opinions on Baby Boomers and Millennials, but Generation X (Gen X) seems to get less media attention. Generation X, born between 1965 and 1980, is often referred to as the “sandwich generation” due to its unique position between Baby Boomers, who are in/nearing retirement, and Millennials, who are still establishing their careers. As Gen X ages into their late 40s and 50s, they face significant headwinds in retirement planning, such as rising healthcare costs, and lingering student loan debt. Despite these hurdles, there are significant benefits that corporate retirement plans have offered Gen X to increase their retirement readiness.

One of the greatest benefits for Gen X’s retirement planning has been the widespread availability of corporate retirement plans, particularly 401(k) accounts. Notably, this generation has experienced multiple recessions and market downturns during their careers, such as the dot-com bubble burst in 2000, and the 2008 global financial crisis. Even such, many have had the opportunity to take advantage of employer-sponsored retirement plans that provide a reliable means of saving for the future.

The 401(k) plan, which became more popular in the 1980s and 1990s, has provided Gen X participants with a convenient, tax-advantaged vehicle for retirement savings. This structure provides workers a turn key way to contribute a portion of their income pre-tax, reducing their taxable income while allowing their investments to grow without immediate tax consequences. Roth contributions can also be allowed, which provides the opportunity for tax free withdrawals in retirement. For many, these plans have helped ensure that they have some financial security despite other economic challenges.

Moreover, many employers match employee contributions to their 401(k) accounts, providing an added incentive to save. These employer contributions have significantly boosted retirement balances, helping Gen X participants catch up for lost time in their retirement savings.

Over the years, corporate retirement plans have evolved to make saving for retirement easier and more automatic for employees. One of the key innovations in recent years is the advent of auto-enrollment and auto-escalation features in 401(k) plans. These features automatically enroll employees in retirement plans and gradually increase their contribution rate over time, helping workers save more without having to actively make decisions.

For Gen X, who may have faced competing financial priorities in their earlier years, auto-enrollment has been a game-changer. With many people struggling to prioritize long-term savings while managing short-term expenses like mortgages or education costs, automatic contributions ensure that employees are consistently putting money aside for retirement. Additionally, auto-escalation allows individuals to gradually increase their savings rate as their income grows, helping them build their retirement nest egg over time.

Institutional level investment options are usually out of reach for average investors, but are a common place for a well-operated retirement plan. These fund menu options tend to boast stronger long term returns, in part due to lower expense ratios offered within institutional share classes. In addition, most plans now offer target-date funds, which automatically adjust the investment mix based on a participant’s expected retirement date. This allows Gen X participants to focus on other aspects of their financial planning while the fund managers handle the investment strategy. Additionally, some employers offer personalized retirement planning tools or guidance through in-house advisors or external services, giving Gen Xers valuable insights into their retirement goals and how to achieve them.

These services have helped Gen X navigate an increasingly complex financial landscape, where making the right investment choices can make a substantial difference in the size of a retirement portfolio.

Another benefit for Generation X is the ability to take advantage of catch-up contributions. The IRS allows individuals over the age of 50 to contribute more to their 401(k) accounts than younger workers. This catch-up provision has been especially important for Gen Xers, who may not have been able to save enough earlier in their careers due to factors like debt, caregiving responsibilities, or other financial constraints.

The SECURE Act 2.0, signed into law in December 2022, further strengthens this benefit by expanding catch-up contribution limits. The legislation also provides greater flexibility for individuals to save for retirement later in life, ensuring that Gen Xers have more opportunities to catch up on their savings as they approach retirement.

While Generation X faces a range of retirement challenges—from student loan debt to healthcare costs—corporate retirement plans have been a powerful tool in helping them navigate these obstacles. Employer-sponsored retirement benefits, 401(k) matching, auto-enrollment, and institutional investment options, have allowed Gen X participants to save for retirement more efficiently and securely. By continuing to make use of employer-provided resources, Gen X can build a stronger foundation for the future, no matter what challenges lie ahead.