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An average of 11,400 Americans are turning 65 each day this year, and more than 4.1 million will reach this milestone annually through 2027. Although studies show that many members of this generation risk outliving their financial resources, retirement could become even more challenging as members of Generation X approach age 65.
“While Gen X represents a smaller population compared to baby boomers and millennials, they have an outsized problem,” according to a report from the Retirement Income Institute. “Research shows that they may be the least prepared for a secure retirement.”
Many factors contribute to this lack of preparedness.
“From adverse economic cycles and the financial pressures of supporting children at the same time as aging parents, to lower savings rates and increased costs for basic needs like health care and education, Gen-X has experienced these challenges during their peak working years, unfortunately,” the report said.
The oldest Gen Xers will turn 65 in 2030, with the majority having paid into Social Security over their working years and expecting to receive payments to supplement their retirement income. According to Social Security Trustees, the combined trust funds face a financial shortfall of $25.1 trillion in present value through 2099 and $72.8 trillion over an infinite horizon. Furthermore, the combined Social Security trust funds will be depleted and unable to finance full benefits in 2034, which now is less than 10 years away.
Although the date of depletion for the combined trust funds varies somewhat from year to year based on economic conditions, for the last 20 years trustee reports have consistently estimated that funds will be exhausted between 2037 and 2042.
“The financial problems of the Social Security program are structural and will require structural changes to benefit levels, taxation or a combination of the two,” the report said. “That said, trust fund depletion does not mean bankruptcy. Social Security does not have legal borrowing authority. When the trust funds are depleted, the program can only pay out in benefits what it receives in revenue. That is a far cry from bankruptcy, which would imply that the program cannot pay benefits at all.”
However, unless Congress and the president act to reform Social Security, the program will be able to pay only approximately 79% of estimated benefits when the retirement trust fund runs out of assets in 2033. Employers can help by offering protected income strategies in their retirement plans and providing professional advice as a workplace benefit.
“The year 2025 is the peak of the peak 65 zone, the largest surge of retirement-age Americans turning 65 in our nation’s history, and fewer employers offer a traditional defined-pension retirement plan that provides much-needed protected income guaranteed throughout retirement,” the report concluded. “The challenges facing the peak 65 generation are even greater for Gen X and will be magnified for millennials, a larger demographic than either the boomers or Gen X. If we’re in the peak 65 zone now, we’ll soon be in the peak millennial zone.”
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