07/15/2013 - Generation X, those Americans in their 30s and 40s, suffered especially badly during the Great Recession and could see their economic well-being spiral downward as a result when they retire.
Gen Xers lost nearly half of their overall net worth between 2007 and 2010, an average of about $33,000, reducing their “already low” levels of wealth, according to a new report from The Pew Charitable Trusts. The report, “Retirement Security Across Generations” raises the issue of how well Americans are preparing financially for their retirement and the impact of the economic downturn on their future.
The oldest baby boomers were just becoming eligible for Social Security when the Great Recession hit in 2007, leaving them vulnerable to downward mobility as they entered their golden years. But the report finds that the boomers, born between 1946 and 1955, actually were in stronger financial shape than previous generations had been when they faced retirement. Thanks to the dot-com boom and housing bubble, boomers had accumulated more wealth by their 50s and 60s than Depression-era babies—those born between 1926 and 1935—and war babies—those born between 1936 and 1945—had at the same ages.
The oldest boomers lost about 25 percent of their wealth during the 2007-2009 recession. But the analysis says they generally had saved enough to replace more than 70 percent of their preretirement incomes—close to the goal recommended by many financial advisers.
Gen X, on the other hand, will have enough resources to replace only about half of their preretirement incomes. One reason is that Gen Xers, defined as those born between 1966 and 1975, have higher debt than previous generations, partly because of student loans and credit card obligations, and lower rates of home ownership.
“As policymakers focus on Americans’ retirement security, particular consideration should be paid to how younger generations of workers can make up for these losses and prepare for the future,” says Erin Currier, who directs Pew’s economic mobility project.
The report is based on data from 1989 through 2010 collected by the Federal Reserve Board and the University of Michigan. It was supported in part by the Charles Stewart Mott Foundation.
For more information, go to economicmobility.org.