Gen Xers Face Retirement Trouble

Baby Boomers get all the attention when it comes to the retirement-savings crunch (okay, when don't Boomers get all the attention, period?), but it turns out that Gen Xers are actually in worse shape. Fifty-six percent of Gen X households will lack adequate savings and assets to be able to maintain their current standard of living if they retire at age 65, according to the Center for Retirement Research at Boston College.
It's not as if Boomers are really in better shape -- let's just call it less worse: Between 41 percent and 48 percent of Boomer households aren't on pace to have sufficient assets at age 65 to maintain their standard of living once they stop working.

Gen Xers have always scored lowest in the National Retirement Security Index, but 2009 marks the first time that more than half of them lack the necessary assets to maintain their lifestyle once they retire. Back in the good old days of 2004, a still anemic 49 percent of Gen X households were at risk of not being able to maintain their standard of living in retirement. Boomers ranged between 35 percent at risk (Early Boomers) and 44 percent (Late Boomers.)

The main culprit in declining security is the erosion of home equity; according to CRR calculations, 75 percent of the change in the Retirement Security Index is attributable to home values falling.

Given that relying on homes to generate plump retirement nest eggs was never really a viable strategy -- bubble burster Robert Shiller pegs the long-term inflation-adjusted annualized gain for homes values at less than 1 percent -- Gen Xers (and, yes, Boomers too) would be wise to double down on what gets saved from their paychecks. Think you've got time to play catch up down the line? T. Rowe Price CFP Stuart Ritter says un-uh. "It's popular to think that it will be easier to save more later on when you are making more, but the reality is that there will be more demands on your money down the line, too," Ritter says. "It just doesn't get any easier."

Two somewhat painless ways to push yourself to save more:

1. Increase your 401(k) contribution rate by one percentage point a year until you're saving at least 10 percent of pre-tax income. You'll likely need to do this by contacting your plan each year; sadly, very few 401(k) sponsors offer auto-escalation rates, despite the obvious need to automate higher 401(k) contributions.
2. When that raise finally materializes, earmark half of it for your retirement savings, by either boosting your 401(k) contributions or bumping up your IRA for the coming year. Making that savings commitment before you've gotten into the habit of spending the raise makes it an easier move to stick with.

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