Facing an insecure financial future, America’s ‘neglected middle child’ may have to chart a different path to post-work life

For years, Mike Cundall Jr. thought he was on the proper path to retirement.

A professor of philosophy at North Carolina A&T University, Cundall, 49, and his wife, Amy Werner, 48, did everything right. They started saving for retirement when they entered the workforce and faithfully put money from every paycheck into 401(k) plans and Roth IRAs. Their goal: to save enough to have a monthly income of $5,000 in retirement.

But now Cundall is beginning to feel apprehensive. He wonders whether he’ll be able to reach that $5,000-a-month goal and, if he does, whether it will be enough.

One reason for the Greensboro, North Carolina, resident’s anxiety: the unpredictability of the stock market. When the financial crisis hit in 2008, he recalls, “our savings essentially got halved in a matter of weeks.”

Then there’s inflation and rising health care costs. Financial advisers have counseled the couple to save more, but the costs of raising their three children — now 22, 20 and 13 — have made that impossible, Cundall says.

“All this has led me to believe that no matter how much we’ve saved, we’re not going to be able to retire and simply enjoy the golden years,” he says.

Cundall’s pessimism is widely shared among his peers in Generation X — or “Generation anXious,” as a recent Northwestern Mutual report dubbed them.

The insurance and financial planning firm’s 2023 Planning & Progress Study found Xers, the cohort born from 1965 through 1980, to be the only generation in which a majority — 55 percent — believe they won’t be financially prepared for retirement.

According to the report, based on a February-March Harris Poll survey, Gen Xers are less likely than the general adult population to believe they have had or will have a successful career or that they will achieve long-term financial security. They are considerably more likely than boomers to predict they will outlive their savings, and on a 10-point scale, they rate their sense of financial security at 5.6, markedly lower than other generations.

Those worries appear to be well founded. Thirty-five percent of the Gen Xers surveyed by Prudential in March and April reported having less than $10,000 in retirement savings, and 18 percent have nothing at all saved for retirement.

“The anxiety is real, and I think it’s probably somewhat well placed,” says Brian Ream, a member of Gen X and managing principal at accounting and wealth advisory firm CliftonLarsonAllen in New Bedford, Massachusetts. In many respects, he says, “Gen X is woefully unprepared for the traditional sense of retirement.”

America’s ‘middle child’

To some degree, Gen X’s anxiety has a straightforward explanation: Its members — numbering about 65 million, nearly 20 percent of the U.S. population — now range in age from 43 to 58, and retirement is no longer some event in the distant future.

But many reasons for their “pretirement” jitters are more complicated, rooted in past collective experiences and present economic challenges.

Growing up, Gen Xers were referred to as latchkey kids because, with both parents working, many came home from school to an empty house. Falling between two larger and more attention-getting age groups, boomers and millennials, they’d come to be called the forgotten generation — or, as a Pew Research Center study memorably put it, “America’s neglected ‘middle child.’ ”

“In my experience with clients, Gen Xers have been spending a lot of time trying to find identity,” says Thomas Jensen, a Portland, Oregon–based wealth management adviser with Northwestern Mutual. Now they are trying to figure out how retirement might change their identity.

“On the financial side, our retirement’s going to look different than that of our parents,” Jensen says. “There’s some anxiety with that.”

Compared to their predecessors, Gen Xers married and had families later, says Ream. That helped earn them another nickname: the sandwich generation, with many caring for aging parents while still raising their kids.

“You’ve got these competing goals of ‘I want to save for retirement’ but, at the same time, ‘I’ve got two kids in college and my parents are getting to the point where I am being required to either help out financially or spend more of my time on their care and well-being,’ ” he says.

Amid these challenges, Gen X is feeling whipsawed by rising prices and growing debt. More than two-thirds of Gen Xers worry about inflation short-circuiting their savings goals, according to the Prudential survey. A June 2023 analysis by Credit Karma found that Gen Xers owed the most among adult generations, with an average debt load of $61,036, and shell out the most per month ($599 on average) in repayments.

As a result, Jensen says, many simply don’t “have the privilege or the luxury to say, ‘Hey, I’m going to put money aside for retirement.’ ”

Losing the pension parachute

As sandwiched or saddled with debt as Gen Xers may be, their lack of retirement readiness can partly be attributed to circumstances beyond their control — most notably, the shift by private-sector employers from offering guaranteed pension benefits to savings-based plans such as 401(k)s, which accelerated as Xers were moving into the workforce.

“From my perspective, the biggest thing that is different for Gen X is that they no longer have the ability to rely, as previous generations did, on traditional pensions,” says Dylan Tyson, president of Prudential Retirement Strategies.

In 1975, there were 27.2 million active  participants in traditional private-employer pensions, also called “defined benefit” plans, which provide retirees with a guaranteed monthly income for life, according to the Congressional Research Service. Pension participation remained stable into the mid-‘80s, when the oldest Gen Xers were starting their careers, but then began a steady decline, falling to 12.6 million by 2019.

As pensions waned, “defined contribution” plans such as 401(k)s — which require workers to save on their own and figure out how to manage withdrawals in retirement to ensure the money lasts — became the dominant form of retirement benefit, growing from 11.2 million active participants in 1975 to 85.5 million in 2019.

Gretchen Elhassani, 47, a freelance writer in Cary, North Carolina, has seen that sea change play out firsthand. “My grandparents got a job, and they kept that job for 40 years, and then they retired and they were able to just live off their pension without any worries,” she says. Her parents had multiple employers over the course of their careers, but “each place that they went to had a pension plan.”

For Elhassani, things were different. Her first workplace, a nonprofit organization, offered a 403(b) plan she could contribute to, but there was no employer match. Still, she socked away $100 per month. After leaving that job, however, she changed workplaces frequently and “didn’t stick with one company long enough to accrue any meaningful savings.”

“I’ve always said that my retirement plan is just not to retire,” she says.

Gen X workers are three times more likely to have a defined-contribution plan than a defined-benefit plan, according to a July 2023 report by the National Institute on Retirement Security. Only 20 percent expect a pension to be part of their retirement income, the Prudential survey found.

Concerns about the future of Social Security compound Xers’ anxiety about having a reliable income stream in later life. Just 45 percent believe Social Security will be there when they need it, the Northwestern Mutual study found, compared to 55 percent for the general adult population.

Social Security is not in danger of running out of money, as long as the government keeps collecting payroll taxes on almost all U.S. workers’ wages. However, retirement benefits could be reduced by more than 20 percent by 2033 if Congress does not take steps to shore up the program’s finances, an unsettling prospect for the nearly 3 in 5 Gen Xers who told Prudential’s pollsters they expect to rely on Social Security as a source of retirement income.

A new vision of retirement

Add it all up, and “Gen X faces one of the most complex landscapes for retirement readiness in decades,” one that requires “a new set of retirement strategies,” says Rob Falzon, Prudential vice chair, in a statement on the company’s findings.

For example, thanks to the security of pensions, not to mention much lower tuition costs, their parents and grandparents may have been better situated to pay for a child to go to college. Gen Xers might need to rethink that, Ream says.

“You can always finance an education” with student loans, he notes. “You can’t finance your retirement.”

Ironically, Elhassani says her college-bound sons, Youssef and Mehdi, are more proactive about saving for retirement than she is. The 18-year-old twins plan to start a business cleaning dorm rooms and frat houses. Mehdi aims to retire in his 40s or 50s, while Youssef has already opened a retirement account and makes stock trades on his iPhone.

Gen Xers may also need to think differently about spending than did their parents, or even their boomer older siblings. Let’s say they want to travel in retirement. “Travel could be, ‘I’m going to get a pop-up camper and see the national parks,’ or it could be, ‘I’m going on safari in South Africa,’ ” Ream says.

That might mean adjusting their dreams to fit their budget — or adjusting their budget to fit their dreams.

Tyson advises worried Gen Xers to think in terms of monthly income. Some of his recommendations: Keep tabs on what you can expect to get from Social Security, retirement-account withdrawals and other income sources (such as pensions or annuities). Will that cover your monthly needs? How much more would you need for travel and other lifestyle plans? Finding ways to cut spending now may put Gen Xers in a better position to enjoy some of those luxuries later, he says.

Changes from the SECURE 2.0 Act — a 2022 federal law that affects 401(k) plansindividual retirement accounts (IRAs) and other savings vehicles — could also help Gen Xers achieve their goals, Tyson adds.

For example, SECURE 2.0 creates a mechanism for employers to add an emergency savings component to most workers’ retirement plans. Starting in 2024, up to 3 percent of a qualifying employee’s after-tax earnings can be set aside to build a rainy-day fund of up to $2,500, providing an alternative to tapping retirement accounts for emergencies.

Many Gen Xers are also coming to realize that retirement may not necessarily mean leaving work behind. Nearly half — 47 percent — expect to retire later than they’d planned, and 40 percent anticipate working part-time in retirement, the Prudential study found.

Cundall expects to be one of them. The author of the 2022 book The Humor Hack: Using Humor to Feel Better, Increase Resilience, and (Yes) Enjoy Your Work hopes his “retirement” years will include doing consulting work on how people can use humor to increase engagement.

While he’s concerned about having enough to retire on, his plan to keep working is driven more by passion than money: “I don’t want to feel like I have to be there.”

Ream also believes that many members of Gen X will create a new vision of retirement by finding ways to bring in income through entrepreneurship or part-time work they want rather than need to do.

“I think there’s going to be the opportunity to still maintain employment but do it on slightly more favorable terms,” he says, summing up his cohort’s view this way: “I can work until 67 or 68, but I’m going to work differently.”

“All of these societal changes have been kind of thrust upon [Gen Xers],” he adds. “It’s up to us now to say we’re going to take control. Don’t let the tide take you out. It’s just time to maybe swim a little harder.”