The Gen X Savings Crisis: How Plan Sponsors Can Help

A recent December 2023 survey by Schroder’s revealed that almost half of non-retired Gen Xers, born between 1965 and 1980, have neglected retirement planning. Additionally, they highlight a savings gap exceeding $450,000 between projected needs and estimated savings. A separate study by the National Institute on Retirement Security in the past year found that the average Gen X household possesses only $40,000 in total retirement savings. So, what can employers do to assist their MTV Generation workers in saving?

1. Flexible Work Arrangements: Recognize that Gen Xers may choose nontraditional retirement paths like phased retirement or encore careers. Support these choices through flexible work arrangements, such as part-time or remote work options. This allows employees to extend their workforce tenure and delay their full retirement date. Tailor roles based on their new schedules and availability.
2. Emergency Savings Opportunities: Starting this year, SECURE 2.0 enables employers with defined contribution plans to offer emergency savings accounts for non-highly compensated employees. This provision helps prevent hardship withdrawals by automatically enrolling workers at up to 3% of their salary as Roth after-tax contributions, capped at $2,500.
3. Mid-Career Financial Checkups: Offer personalized financial consultations focused on where Gen X employees are in their financial journey. Emphasize mid-career corrections and available savings acceleration strategies, such as catch-up contributions to employee-sponsored retirement accounts.
4. Support for “Sandwich Generation” Challenges: Provide resources and support for those in the “sandwich generation,” including elder care assistance, childcare benefits, and flexible spending accounts for dependent care needs.

Plan sponsors play a critical role in bridging the retirement savings gap for Gen X employees. Initiatives like SECURE 2.0 are steps in the right direction, but they must occur within a holistic and individualized approach to employee financial well-being. By integrating measures like those listed above into your company culture and benefits structure, you can demonstrate a serious commitment to the long-term success and stability of your workforce. Ensure early and frequent engagement with employees. Proactive plan sponsors can expect not only to assist their employees in securing a more stable financial future but also to potentially benefit from a more productive and loyal workforce.

Sources

https://www.nirsonline.org/reports/genx/

https://mybrand.schroders.com/m/641f99601ba5236e/original/Schroders_2023_US_Retirement_Survey_Gen_X_Rpt_FINAL.pdf

https://www.natlawreview.com/article/secure-act-20-what-s-it-you