By Alex Moore
While today’s retirees face many challenges like the declining value of Social Security payments and high medical expenses, the next generation of retirees may have an even bleaker outlook.
According to The Forgotten Generation, a 2023 report from the National Institute on Retirement Security, the median Gen X household—led by someone born between 1965 and 1980—has only $40,000 in retirement savings in private accounts.
Given this information, most Gen Xers have savings far below the targets needed for a healthy retirement with the oldest members of that generation less than a half-decade from qualifying for Social Security. Across all gender and ethnic groups analyzed for the study, less than 20 percent have even half the savings they’d need to enjoy their golden years, while more than 50 percent have less than one tenth of what they’ll need.
One major driver behind Gen X’s struggles preparing for retirements is limited access to quality retirement plans. The research found that only 62 percent work for an employer who sponsors a retirement savings account like a 401(k) with a company match. In several industries, like farming, accommodation and food services, construction, and real estate, this figure is below 50 percent. What’s more, only 14 percent of Gen Xers have access to a traditional pension plan through their employer.
Many Gen Xers will rely on Social Security to bolster their retirement savings as a result, even as the program faces potential cuts in the 2030s because it brings in less revenue than it needs to cover its expenses.
The National Institute on Retirement Security has several policy recommendations to address this issue, many of which would also benefit todays’ retirees.
One potential policy would institute a credit for caregiver work, such as caring for aging parents or raising children. When workers leave the workforce to become caregivers, they often accumulate several years with zero earnings that negatively affect their Social Security Benefits.
The report suggests that allowing people to drop those years from their benefit calculations would strengthen U.S. retirement security while recognizing caregivers’ contributions to society.
Another plan endorsed by the National Institute on Retirement Security is requiring state governments to offer alternative retirement plans for workers whose employers do not sponsor a plan. Among the 68 percent who have such a plan available, about 88 percent of wage and salary workers participate, so it’s likely that many people would sign up for the plans if their state began offering them. As of May 2023, 19 states had introduced such programs, and participants had used them to accumulate $838 million in assets saved.
A third potential policy change would target the lowest-income seniors by expanding Social Security’s special minimum benefit for lifetime low-income earners. The program, designed to support people who worked their whole lives without ever earning high wages, can provide up to $1,600 for people who worked for at least 30 years, according to SSOfficeLocation.com. However, because the program is indexed to prices, not wages, the threshold to qualify has become so steep that soon, no one will be eligible. The National Institute on Retirement Security proposes that Congress make the program available for all seniors whose income is less than 125 percent of the federal poverty line to fight extreme poverty among seniors.
