WSJ Your Money Briefing - Generation X Is Turning 60, and Many Can’t Afford to Retire

Episode Date: August 23, 2024

Many Americans born between 1965 and 1980, often referred to as Gen X, are facing shortfalls in savings as they approach the traditional retirement age. Wall Street Journal reporter Hannah Miao joins host J.R. Whalen to discuss why they are in a worse position than the previous generation’s baby boomers were at the same age. Sign up for the WSJ's free Markets A.M. newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

OCI is the single platform for your infrastructure, database, application development, and AI needs. Do more and spend less like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI at oracle.com slash wall street. Here's your money briefing for Friday, August 23rd. I'm JR Whalen for The Wall Street Journal. The oldest members of Generation X will soon turn 60, but as they move closer to the traditional retirement age, many are still struggling to make ends meet. Gen X often finds itself in what's called a sandwich generation.

So they're caring for their older parents who might be aging, who might need financial support, and you know, people are living longer than they had in previous generations. Meanwhile, their kids are often living with their parents for longer. We'll talk to Wall Street Journal reporter Hannah Meow after the break. AI may be the most important new computer technology ever, but AI needs a lot of processing speed and that gets expensive fast. Upgrade to the next generation of the cloud, Oracle Cloud Infrastructure or OCI. OCI is the single platform for your infrastructure, database, application development, and AI needs. Do more and spend less like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI

at oracle.com slash Wall Street, oracle.com slash Wall Street. Generation X is approaching retirement, but many aren't in a financial position to stop working anytime soon. Wall Street Journal reporter Hannah Miao joins me. Hannah, when we say Generation X, what age group are we talking about? Generation X includes people born between 1965 to 1980. So the oldest members of Gen X are 59 this year, and the youngest are 44. Why is this group often referred to as the Forgotten Generation?

So Gen X is a relatively smaller generational cohort compared with the folks that are older and younger than them. Obviously we hear a lot about baby boomers and millennials. Gen X is kind of sandwiched in between them. There's about 65 million members of Gen X, so they're often left out of the conversation. Sometimes people call them the middle child of the generational cohorts. You mentioned baby boomers. How has the experience of people in Gen X compared with that group?

There are some measures that show that Gen X right now is financially worse off than baby boomers were at the same age. So one measure we can look at is household net worth as measured by the Federal Reserve's Survey of Consumer Finances. So for U.S. households that were led by Gen Xers between 45 and 54 years old in 2022, they had a median household net worth that was about $250,000 at that time. And that is about 7% lower than that of baby boomers at the same age in 2007, according to inflation-adjusted Fed data.

That was really the only age group where we experienced a drop in median wealth over that 15-year period. What is it about Gen X's career timeline that's created retirement savings challenges for many people? Gen Xers were really the guinea pigs of the 401k system. The 401k is named for a change in the tax code from 1978, and it really picked up steam in the 80s. So when Gen Xers were entering the workforce

and starting their careers, the 401K system was still relatively new. And a lot of the features that are now commonplace with 401Ks, such as automatically enrolling employees into those plans, automatically upping those contributions over the years as employees' income increases. Those features didn't come about until later in Gen X's career. So it's a new system, and Gen X was really caught

in the middle of that transition. On average, how much money have Gen Xers put away in their retirement accounts? So one figure we can look at is Vanguard Group, On average, how much money have GenXers put away in their retirement accounts? So one figure we can look at is Vanguard Group, which is a very large retirement plan provider, puts out a study of what those aggregate balances are. So we saw that in 2023, workers between 45 and 54 years old had a median account balance of roughly $60,000 in retirement plans that are like 401Ks,

an employer-sponsored retirement plan. And if you think about it, for most Americans, that is not a ton of money to get by on for your entire retirement. A lot of financial experts will recommend having roughly six times one salary saved by the time you're 50 years old. So we can see from that measure at least a lot of people have a way to go in having enough money to supplement their retirement expenses.

You spoke with several people in Gen X. What are they doing to make up for shortfalls in their retirement savings? Some Gen Xers I spoke with did feel like they're prepared for retirement and did feel like their 401K set them up. But of course they've had to live a bit frugally to make room for those savings throughout their years. Others who haven't built up as big of a nest egg really are just saying, I'm planning on working as long as I can. Many people I talked to said, I'm just going to work until I die, which is obviously a pretty sobering thing to hear. But Gen Xers also kind of have a bit of that it is what it is attitude. So

that's certainly one strategy that folks are using. In your reporting, you also mentioned that there were stretches of time where some in Gen X didn't think that keeping money in the stock market was worth it. Why not? Yeah. So Gen X has witnessed several big market downturns. Obviously, the 2008 financial crisis was a very defining time. And many of those members in GenX were at prime working age and in the prime of their career when that happened. So if they were impacted negatively during that period,

it took some time to recover from that. They also witnessed the bursting of the dot- com bubble in the early 2000s, which really hit individual investors pretty hard. And so when you see these things time and time again, it can make you feel nervous to have your money in the stock market. Financial markets are a great wealth generator for many Americans. At the same time, it can be volatile. So it can be hard to see tens

of thousands, if not hundreds of thousands of dollars that you've saved over the years evaporate when the market crashes. What other areas of their personal finances have created challenges for GenX? One of the things that's interesting is many members of GenX actually are still holding educational loans. So the Federal Reserve's Survey of Consumer Finances shows that actually more than a quarter of those GenX households held education loans. That's compared with about 15% of baby boomers at the same age in 2007.

When those loans build over time, especially with interest, that can be very daunting to have a lot of debt while you're trying to save for retirement or prepare for your later years. The other thing that's interesting is Gen X often finds itself in what's called a sandwich generation. So they're caring for their older parents who might need financial support, and you know, people are living longer

than they had in previous generations. Meanwhile, their kids, who are often Gen Z, are also struggling in this economy. A lot of Gen Zers can't afford rent or college costs so much money. And Gen Zers are often living with their parents for longer or financially relying on their parents for longer. That's WSJ reporter Hannah Miao. And that's it for your money briefing. Join us Sunday as we examine how Americans in their 20s

are tackling their personal finance challenges in part three of our series, Gen Z and the Debt Trap. And Hannah will be back with us on Monday to discuss ways that Americans approaching 60 can catch up if they've fallen behind on saving for retirement. Today's show was produced by Zoe Culkin. I'm your host, JR Whalen.

Jessica Fenton and Michael Laval wrote our theme music. Our supervising producer is Melanie Roy. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Zinsley are our deputy editors. And Falana Patterson is the Wall Street Journal's head of news audio. Thanks for listening. AI may be the most important new computer technology ever, but AI needs a lot of processing speed and that gets expensive fast. Upgrade to the next generation of the cloud, Oracle Cloud Infrastructure, or OCI.

OCI is the single platform for your infrastructure, database, application development, and AI needs. Do more and spend less, like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI at oracle.com slash wall street, oracle.com slash wall street.