The oldest members of Generation X are turning 59 1/2 this month, the earliest age when workers can start withdrawing retirement assets without a penalty. But many Gen Xers are far from prepared for their golden years, with almost half saying it would take a “miracle” for them to be able to retire, according to a new Natixis study.

Gen X — people born between 1965 and 1980 — is the first generation of U.S. workers to come of age with 401(k) plans as their primary retirement vehicle after employers largely shifted away from traditional pensions in the 1980s. But the 401(k) puts the onus squarely on the shoulders of participants to figure out how much to save, how to invest and how to withdraw their money in retirement — a do-it-yourself approach that noted retirement expert Teresa Ghilarducci has described as flimsy. 

That’s left Gen Xers largely on their own to plan for retirement, and many are woefully underprepared, not only in the amount of assets they have squirreled away but in their comprehension of key financial information, according to Natixis, an investment bank. The average retirement savings of Gen X households is about $150,000 — far from the roughly $1.5 million that Americans say they need to retire comfortably.

What Gen X has in common with Jan Brady

Gen X “is the Jan Brady of generations,” overlooked while the larger baby boomer and millennial generations grab more attention, noted Dave Goodsell, executive director of the Natixis Center for Investor Insight. “They were the kids left alone after school, and they are kind of on their own in retirement too.”

About 1 in 5 Gen Xers worry they won’t be able to afford to step back from work even if they were able to save $1 million for retirement, the study found. And about one-quarter is concerned a shortage of savings will force them to return to work after they retire. 

Other recent studies have also found that Gen X is in dire shape for retirement, with the National Institute on Retirement Security finding earlier this year that the typical Gen X household with a private retirement plan has $40,000 in savings. About 40% of the group hasn’t saved a penny for their retirement, that study found.

Even so, that’s not keeping Gen Xers from dreaming about retirement, with survey participants telling Natixis they plan to retire at 60 on average. They also believe their retirement will last about 20 years — shorter than what many retirees actually experience. 

Such expectations may seem discordant, especially given the lack of retirement savings that they’ll need to fund their older years. But Goodsell chalked up the conflicting views on retirement, with half of Gen Xers thinking they need a miracle to retire even as they want to stop working at 60, to “wishful thinking.”

“The other thing I see is that 48% of people in the survey just stopped thinking about [retirement],” Goodsell noted. “I interpret it as saying they are stressed. But having your head in the sand isn’t a great strategy for anything.”

Many are overly optimistic 

Gen X also has some unrealistic views of their potential investment performance, with the group saying they expect their retirement assets to have long-term returns of 13.1% above inflation, the Natixis findings show. At today’s inflation rate of about 3.3%, that would imply an investment return of 16.4% — well above the typical annual return of roughly 10% for the S&P 500.

Meanwhile, only about 2% of Gen Xers understood key aspects of investing in bonds, such as the impact that higher interest rates have on bond prices, the analysis found. 

“For a lot of folks, when they are thinking of investing, it’s back-of-the-napkin thinking,” Goodsell said. His advice to Gen Xers is to “learn as much as you can, and be realistic about what you can accomplish.” 

Even so, Goodsell noted, there are some aspects to retirement that are out of workers’ hands, which can add to people’s anxiety. About 4 in 10 Gen Xers worry they won’t be able to work as long as they like — and that, by contrast, is grounded in reality, Goodsell noted. 

One 2018 study from the Urban Institute that tracked workers from their early 50s through at least age 65 found that the majority had to stop working before they reached retirement age, with 28% stopping work after a layoff, while another 9% retired because of poor health. Only 19% said they retired voluntarily.