What Peak 65 Means for My Gen X Clients

In 2024, the oldest Gen Xers will be 59, highlighting the upcoming challenges of Peak 65. To better understand their future, Gen X should evaluate how the ‘Sliver Tsunami’ of retiring Baby Boomers is faring.

A recent Alliance for Lifetime Income study reports that a record high of 4.1 million Americans will turn 65 in 2024, continuing to surge upward through 2027—dubbed the ‘Peak Zone.’ While Boomers aged 65-75 hold an average net worth of $1.7 million, their median retirement savings are only $202,000. This disparity raises questions about whether their retirement savings fulfill their desired retirement goals and provide security.

Key Takeaways

• Gen X should evaluate Peak 65 by looking at the current realities faced by retiring Baby Boomers, including their savings, income sources, and overall financial security. 
• With Gen X at the height of their earning potential, it’s crucial to identify and plan for their desired retirement lifestyle.
• While Gen X’s average net worth is lower than other generations’ perceptions of wealth, it’s important for them to focus on self-care and proactive planning to ensure they feel secure and prepared for Peak 65.

The Bureau of Labor Statistics reports that people between the ages of 55 and 64 are spending $78,000 on expenditure. Only 24 percent of Boomers have pensions: the median benefits, private and public, range from $17,600 to $25,403. Furthermore, according to an Alliance for Lifetime Income study, Boomers’ median Social Security payments are $22,000. Using the rule of thumb 4% withdrawal rate during retirement on a median savings account, Boomers can expect $8,000 annually, plus a potential $39,600 combined from social security and pension, netting $47,600. 

For some folks, the median numbers suffice for a lifestyle. However, most Boomers don’t feel secure and don’t match replacing 70 to 80 percent of their pre-retirement incomes, much less the stretch goal of 100 percent of lifestyle income replacement. With information based on their Boomer peers, the question becomes, what does Peak 65 mean for Gen X?

What I’m Telling My Clients

My Gen X clients need to know what their lifestyle numbers are now and for retirement. Gen X is experiencing the highest income earning years, with the most vitality, self-understanding, and the immediate need to fund forthcoming retirement. Their circumstances are the most unique among the generations, so they must define their freedom number to adjust and align their aspirations and finances to feel they are funding the life they want—now and in the future. Unpacking their lifestyle numbers and making mindful and intentional choices that use their wealth to maximize their well-being is critical. 

The Bottom Line

A recent Schwab study asked Americans how much net worth outside of their primary residence it takes to feel wealthy. The answer was $2.2 million, with a household average of those surveyed of $560K across generations, with Gen X holding an average of $460K.Given that they must address longer life spans, care for aging parents, higher lifestyle preferences, and exponentially increasing medical care, Gen X must practice self-care and place their air mask on first, making essential choices and having necessary conversations that help position them for a better peace of mind now and Peak 65 later.

Read the original article on Investopedia.