Generation X expects to maintain their lifestyle in retirement, but they don’t have the savings levels necessary to make that happen.
According to a research brief by the Insured Retirement Institute (IRI), Generation X (those born between 1965 and 1980) have low confidence that their savings will last throughout retirement, but they still think they will have enough income to be secure, including enough discretionary income for leisure activities.
“Gen Xers have a fundamental disconnect that is consistently observed in IRI and other consumer research focused on retirement income and expenses, namely, that the desire to maintain lifestyle leads to hopeful responses,” said Frank O’Connor, IRI’s vice president, research.
“Some may believe they can work longer or part time, expect to receive an inheritance or plan to sell a home for a significant profit. Whatever the case, retirement lifestyle expectations are out of step with retirement savings levels and confidence measures.”
Gen X workers believe they will need more income in today’s dollars than baby boomers and current retirees. At the same time, Gen X workers are worried that their retirement savings would be insufficient to fund their retirement and almost one-third of the cohort does not expect to receive Social Security in retirement.
Gen Xers think they need to save aggressively to have sufficient retirement funds to create the income they do not believe will come from Social Security and pensions.
The group also lacks faith in Social Security, which could stem from the fact that the Social Security’s combined trust fund will be depleted in 2034, only two years after the oldest members of Generation X reach the full retirement age of 67. While current projections show Social Security can pay 76% of benefits after 2034, many Gen Xers appear to incorrectly believe payments will simply cease, IRI said.
Read: Social Security is now projected to be unable to pay full benefits a year earlier than expected
Only 32% of Generation X workers are confident their savings will last until they are 85 years old or older, compared with 45% of baby boomers and 63% of current retirees.
Despite six in 10 Gen Xers having an expectation they will be able to meet basic expenses (food, clothing, shelter, and medical costs) and enjoy leisure activities and travel, relatively few are confident in their ability to live comfortably in retirement.
IRI said this disconnect could be rooted in the definition of the word “comfortable:” many respondents may be acknowledging that they don’t expect to enjoy the retirement they would prefer, but they expect to do the things they desire to do.
Gen X workers still have time to save, but the current average retirement saving of $404,068 will not support lofty income expectations, IRI said. In comparison, baby boomers have average retirement savings of $652,780 and those already retired have $624,940, IRI said.
The study also noted that later-stage workers and retirees overwhelmingly desire their income sources to be guaranteed for life. Generation Xers, in particular, are very interested in investment options that provide downside protection, lifetime income, or both.
“Gen Xers’ desire for guaranteed income should be expected given their lack of confidence in Social Security and the endurance of their savings in retirement,” O’Connor said.
This story originally appeared on Marketwatch
