Six months before the first Gen Xers turn 60, 3 in 10 worry they'll never retire, finds Natixis Investment Managers survey

• Half of Gen X are burying their heads in the sand and avoid thinking about retirement altogether
• 41% of Generation X say inflation is killing their dreams of retirement
• 72% say they would choose safety over investment performance, though almost half (47%) admit they are taking on more risk than they should to get ahead

LONDON, 18 June 2024 – With the first of Generation X turning 60 in 2025, many are feeling under pressure as thoughts turn to preparing for retirement. Results from Natixis Investment Managers’ surveys show that almost half of Gen X (48%) say it’s going to take a miracle to retire securely and half (50%) say they try and avoid thinking about retirement altogether. With Generation X increasingly worried about coming up short, 60% accept that they may have to work longer, however many realize work offers no guarantees, with 47% worried they won’t be able to work long enough.

The report paints a stark picture of retirement plans for Gen X (born between 1965 and 1980), highlighting a disparity between their expectations and reality.

When asked about their goals for retirement, on average, Gen Xers surveyed say they plan to retire at 60, which is early by many global standards, and they anticipate retirement will last 20 years, which is shorter than many retirees experience.

To get there, they are saving an average of 17% from their annual income. However, if Generation X is looking for an edge in their retirement savings, results show that the best place to start will be in analysing their investment plans and habits. Results from Natixis Investment Managers’ recent surveys show that, on average, Gen Xers are optimistic about their investments and have long-term return expectations of 13%, a hope that may be hampered by misplaced views on risk, misconceptions about passive investments, and a critical knowledge gap on bonds.

Prices in the short term, debt in the long term

Two critical issues seem to be shaping Generation X’s thinking about retirement – inflation and debt.  In the short term, they are coming to grips with the reality of inflation. Overall, 83% of Generation X investors say the recent bout of inflation has revealed just how big a threat rising prices are to their retirement security. Nearly seven out of ten (69%) say inflation has hurt their ability to save for retirement and more than half (55%) report that they are saving less due to higher everyday costs.

While inflation is a relatively short-term phenomenon, the retirement outlook across Generation X is also being shaped by a key long-term issue: public debt.  In fact, more than three-quarters of Gen X (77%) are worried that increasing public debt is going to result in reduced retirement benefits. Even small cuts are likely to have a big impact, as 58% believe it will be hard to make ends meet without benefits.

Generation X have more to learn about bonds

In this new macro environment, higher rates have come at an opportune time for individuals who suddenly find themselves at a stage in life where bonds often take on a more prominent role in portfolio plans. However, Natixis IM data finds that Generation X are over allocating to cash and have less of an understanding around how bonds work, given the low interest rate environment which prevailed for so long.

When asked about rates and bonds, only 2% of Gen X knew that higher rates could lead to a decline in prices for the bonds they own today, and that future income potential would be higher from new bonds purchased at current rates.

Consequently, 39% say they want more information on how different types of bonds work and currently, six out of ten (61%) say it’s more fun to invest in stocks than bonds, a sentiment reinforced by the significant market gains made since the end of the global financial crisis.

In addition, findings show that there is also a need for greater education around index funds as Gen Xers, like other investors, are making broad assumptions about the risks of passive at a time in life when misconceptions could prove to be costly.

Overall, 64% of Gen X understand that index funds are designed to provide returns comparable to the market, but not as many see the cost side of the equation, as only 54% think that index funds are cheaper. What’s more, more than six in ten (61%) think index funds are less risky and two thirds (67%) think they will protect them on the downside - a potentially risky sentiment as index funds deliver market returns, up and down.

The use of automated platforms and digital advice is growing

Faced with this complex picture, 56% of Gen X say they will need professional advice on topics ranging from achieving broad financial planning goals (48%) to more specific retirement income plans (44%).

However, while many rely on a relationship with a traditional financial advisor (36%), Generation X is increasingly incorporating automated platforms into the mix. In fact, the number of Gen Xers globally who say they prefer digital advice to in-person has increased significantly over the past 5 years from 35% to 49%.

This is particularly stark in Asia, where that number grew from 41% to 64% between 2019 and 2023, with the UK also seeing a preference for digital, going from 33% to 53%. The sole exception is North America, where preference declined from 33% to 21%.

However, that does not mean Generation X is relying solely on digital advice. Those turning to online advice are typically combining it with a relationship with a traditional advisor, who they hold in high regard. When asked who they trust when making financial decisions, Gen Xers are as likely answer with “my advisor” (91%) as “myself” (91%).  In fact, those surveyed were more likely to trust their advisors than family (76%) and close friends (63%).

Darren Pilbeam, Managing Director & Head of UK Sales, said: “As retirement draws closer, Generation X will need to start having more concrete conversations about how the assets they’ve built can be put to work to provide a sustainable income in retirement. While many of this generation accept they may need to work later than they’d like, it can be easier said than done. A late career layoff can disrupt retirement savings plans, as can stepping out of the workforce to care for an elderly parent or a sick child, or a personal illness or disability that prevents an individual from performing their job.

“While they also face a volatile economic landscape, it is not too late to act. This new milestone should be seen as an opportunity to pressure test assumptions about retirement funding and spending and build a realistic financial plan that considers not just how income will change after working years, but also how expenses will likely change.”

ENDS

The full report is available here: https://www.im.natixis.com/en-intl/insights/investor-sentiment/2024/gen-x-report

Methodology

Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research in March and April 2023. Survey included 8,550 individual investors in 23 countries.

Natixis Investment Managers, Global Survey of Financial Professionals conducted by CoreData Research in March and April 2022. Survey included 2,700 respondents in 16 countries.

Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research in March and April 2021. Survey included 8,550 individual investors in 24 countries.

Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research in February and March 2019. Survey included 9,100 individual investors in 25 countries.