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

Generation X, those born between 1965 and 1980, are facing significant challenges in preparing for retirement, according to recent surveys and reports highlighted by Jaime Raskulinecz, CEO of Next Generation Trust Company. The findings paint a concerning picture of financial readiness among this cohort, with many Gen Xers potentially delaying retirement or continuing to work well into their golden years.

Multiple factors have contributed to Gen X's retirement savings predicament. Raskulinecz points to lingering student debt, mortgage payments, credit card debt, and economic setbacks such as the dot-com bubble burst, stock market downturns, and the financial impact of the COVID-19 pandemic as key contributors. Additionally, many Gen Xers are grappling with the financial strain of caregiving for aging parents, supporting grown children, and anticipating rising healthcare costs in their senior years.

The statistics from various surveys are sobering. According to the 2024 Annual Retirement Study from Allianz Life Insurance Company of North America, less than half (44%) of Gen Xers have a plan for managing income in retirement, and 45% express concerns about how to best take distributions from their retirement plans. The 2024 Transamerica Retirement Survey of Workers reveals that over half (55%) of Gen Xers wish they had saved more for retirement, citing day-to-day expenses, credit card debt, and housing costs as significant barriers to saving.

Perhaps most alarming is the finding from the 2024 BlackRock Read on Retirement report, which indicates that only 60% of Gen Xers feel they are "on track" for retirement – the lowest percentage among all generations. Moreover, 60% worry about outliving their retirement savings, and a staggering 35% 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 Xers 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. This strategy can provide a hedge against stock market volatility and potentially lead to stronger returns.

The appeal of self-directed IRAs lies in their flexibility and potential for higher returns through non-traditional investments. By allowing individuals to invest in assets they understand and believe in, these accounts offer a way for Gen Xers to take more control over their retirement planning. Additionally, the tax advantages of IRAs can help accelerate wealth accumulation, which is crucial for those who may be behind in their savings goals.

However, it's important to note that self-directed IRAs require a higher level of investment knowledge and due diligence. Investors must be prepared to make their own investment decisions and understand the risks associated with alternative assets. Despite these challenges, for Gen Xers facing a potential retirement shortfall, exploring self-directed IRAs could be a valuable strategy to consider.

As retirement approaches for the oldest members of Generation X, the need for effective savings strategies becomes increasingly urgent. The insights provided by Raskulinecz and the surveys she cites serve as a wake-up call for both individuals and policymakers. Addressing the retirement readiness gap for Gen X is crucial not only for the financial well-being of this generation but also for the broader economic stability of the nation as a significant portion of the workforce transitions into retirement.