Gen X Faces Retirement Savings Challenges, Self-Directed IRAs Offer Potential Solution

Generation X, born between 1965 and 1980, is facing significant challenges in preparing for retirement, according to recent surveys and insights shared by Jaime Raskulinecz, CEO of Next Generation Trust Company. The findings highlight a concerning trend of underfunded retirement plans and financial insecurity among this cohort, despite their relative financial stability.

Multiple factors have contributed to Gen X's retirement savings shortfall, including lingering student debt, mortgage payments, credit card debt, and the economic impacts of events like the dot-com bubble burst, stock market downturns, and the COVID-19 pandemic. Additionally, many Gen Xers are grappling with the financial pressures of caring for aging parents and supporting adult children, further complicating their ability to save for retirement.

Several surveys paint a sobering picture of Gen X's retirement readiness. The Wealth Watch survey revealed that less than half (44%) of Gen Xers have a plan for retirement income, while 45% are concerned about how to best distribute funds from their retirement plans. The 2024 Annual Retirement Study from Allianz Life Insurance Company of North America found that 55% of Gen Xers wish they had saved more for retirement, citing day-to-day expenses, credit card debt, and housing costs as primary obstacles to saving.

The 2024 Transamerica Retirement Survey of Workers reported that only 60% of Gen Xers feel they are "on track" for retirement, the lowest percentage among all generations surveyed. Equally concerning, 60% worry about outliving their retirement savings. The 2024 BlackRock Read on Retirement report added to these findings, revealing that just over one-third (35%) of Gen Xers have no retirement account at all.

In light of these challenges, Raskulinecz suggests that self-directed Individual Retirement Accounts (IRAs) could offer a potential solution for Gen X savers looking to boost their retirement savings. Self-directed IRAs allow investors to diversify their portfolios with alternative assets such as real estate, precious metals, private equity, and commodities, potentially providing a hedge against stock market volatility.

The ability to invest in a broader range of assets through self-directed IRAs may be particularly appealing to Gen Xers who have expertise or interest in specific alternative investments. This strategy could enable them to leverage their knowledge and potentially achieve better returns than traditional retirement accounts limited to stocks, bonds, and mutual funds.

The implications of Gen X's retirement savings gap extend beyond individual financial security. As a significant portion of the workforce, Gen X's ability to retire comfortably will have broader economic impacts. Delayed retirements could affect job markets, while inadequate savings may increase reliance on social safety nets and impact consumer spending patterns in the future.

For financial advisors and the retirement planning industry, these findings underscore the need for targeted strategies to help Gen X clients catch up on retirement savings. This may include education on alternative investment options, debt management strategies, and creative approaches to balancing current financial obligations with long-term savings goals.

As Gen X approaches retirement age, the coming years will be critical in determining whether they can close the savings gap and achieve financial security in their later years. The growing interest in self-directed IRAs and alternative investments may signal a shift in retirement planning strategies, potentially reshaping the landscape of personal finance and investment for future generations.