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4 Reasons Gen X Will Struggle in Retirement

Emily Brandon

Members of Generation X are on track to replace a median of just half of their current salary in retirement. That's a far smaller proportion of income than early baby boomers (82 percent) and depression babies (86 percent) have to finance their retirement years, and significantly behind the median of 99 percent of pre-retirement income war babies are now enjoying, according to a new Pew Charitable Trusts report. Here's why Generation X is expected to be worse off in retirement than the baby boomers:

[Read: The Baby Boomer Retirement Crunch Begins.]

Investment losses. Early baby boomers (born between 1946 and 1955) and late baby boomers (born between 1956 and 1965) certainly watched their retirement savings decline during the recession, and lost 28 percent and 25 percent of their net worth, respectively. Generation Xers, who were born between 1966 and 1975, fared even worse and lost 45 percent of their wealth between 2007 and 2010, or an average of about $33,000. "They lost nearly half of their wealth, and that's important because they already had fairly low levels of savings and wealth to begin with," says Erin Currier, director of Pew's economic mobility project.

High debt levels. Both baby boomers and Gen Xers took on more debt in the years leading up to and after the recession, but Gen Xers took on the most. Members of Generation X had more than $80,000 in debt in 2010 including student loans, mortgages and credit card debt, $20,000 more than the late baby boomers. Older generations shed debt over the same time period to a median of $10,000 for war babies (born between 1936 and 1945) and a median of zero debt for depression babies (born between 1926 and 1935).

[Read: The Best Tax Breaks for Retirement Savers.]

Less homeownership. Gen Xers experienced the biggest gains during the housing bubble of any age group, and watched their home equity increase by 231 percent from about $20,000 in 1989 to more than $67,000 in 2007. But then Gen Xers lost 27 percent of their home equity between 2007 and 2010, the largest percentage loss of the generations studied. Still, Gen Xers and all the other generations gained more equity during the housing bubble than they lost during its aftermath. However, the housing gains were not distributed as evenly among members of Generation X as among older people. Less than two-thirds (63 percent) of Gen Xers were homeowners in 2010, compared to 78 percent of early baby boomers and 83 percent of war babies. "So, more than a third of Gen Xers did not benefit from gains in home equity because they did not own homes," says Diana Elliott, research manager for Pew's economic mobility project.

[Read: What Gen X Doesn't Know About Social Security.]

Lack of savings. Although Gen Xers watched their retirement savings grow from less than $2,000 in 1989 to more than $19,000 in 2007, they still had less financial wealth in their 30s and 40s than their baby boomer predecessors had at the same age. And then their savings tumbled by 25 percent to $14,500 in 2010 due to the recession. "Younger Americans are not on course to have enough wealth in retirement to meet their current needs," Currier says. "Gen Xers may be the first generation to fall short of the cohort that came before them and to face downward mobility in retirement."

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