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The Gen X 'Sandwich' Generation Faces Looming Retirement Pitfalls

Paying their children’s expenses while caring for their parents, Gen X families are facing a precarious financial situation as they close in on retirement, a new report explains.  

The study by the Employee Benefit Research Institute (EBRI), which examines key financial indicators of Gen X families and compares them with those of older and younger generations, finds that this so-called “sandwich” generation is financially behind previous generations at the same ages.

In addition to assisting with the expenses of their children and parents simultaneously, Gen Xers also experienced the recession of 2008 when many were in their 30s, making it difficult for them to catch up, according to EBRI’s issue brief, “Comparing the Financial Status of Generation X Families.”

They are also the first generation to essentially have only DC plans available to them in the private sector for the entirety of their career. With that comes the challenge of managing their finances throughout their working careers and retirement in ways that prior generations did not need to, the study emphasizes.  

Craig Copeland, EBRI senior research associate and author of the study, further observes that Gen X families were less likely than older generations to own their homes at their 2016 ages and they had higher debt-to-asset ratios, showing that their balance sheets were in worse shape than those of prior generations.  

In addition, their median net worth was lower than that of the families whose heads were ages 40-51 in 2004. The median net worth of families with heads ages 40-51 in 2004 was $151,861 in 2016 dollars. This value decreased to $103,130 for families with heads of these same ages in 2016. Furthermore, the median net worth in 2016 was below the 1992 value for families with heads ages 40-51, the report shows. 

Copeland further notes, however, that families with incomes in the upper two quartiles had nearly equal results to those of prior generations. “Unfortunately, the results for the families with incomes in the lower two quartiles were so much worse than prior generations that it pulled down the overall results,” he explains. Families with minority heads and heads without a bachelor’s degree also did not fare as well as their counterparts after 2004, the study further shows.

Not All Bad

For Gen Xers, there were some positive indicators, according to EBRI’s report. Gen X families in 2016 were more likely to have owned an IA retirement plan (60.1%) than families with heads ages 40-51 were in 2004 (58.7%). In addition, median IA retirement plan balances were the only financial indicator values that were higher in 2016 than they were in 1992 and 2004. Specifically, the findings show that the median IA plan balances for families with heads ages 40-51 were $27,486 in 1992, $43,170 in 2004, and $60,000 in 2016.

These families also were more likely to have a DC plan, and the median balances for those with a DC plan were higher than those of prior generations at the same ages. EBRI warns, however, that caution should be used when judging this result, as this generation had more of their career in these plans by their current ages and the other parts of their balance sheets were not in as good shape.

Moreover, even though Gen X families were the most likely to have an IA retirement plan, their overall balances were significantly lower than those of Baby Boomer families. At the median, the IA plan balance of Baby Boomer families was nearly double that of Gen X families in 2016. And at the 75th percentile, the Baby Boomer family balance was nearly 80% higher than that of Gen X families.

EBRI concludes by observing how this generation uses its remaining years of working will tell the tale of their financial success in retirement. “Will they up their savings? Will they work longer? Will they reduce their debt? All these will be difficult for most to achieve, particularly for the low-income families,” the study emphasizes.