Over the last several years we’ve heard a lot about the tsunami of Baby Boomers retiring from their federal careers. A recent survey estimates that as many as 60% of Boomers have already retired and the trend should continue through 2029.
Generation X, which includes those born in 1965 through 1980, is the next in line for retirement with the oldest among them turning 59 in 2024. Often called the forgotten generation, here are a few of the retirement-planning challenges Gen Xers face.
Gen X Carries The Highest Student Debt
According to the Education Data Initiative, the average student loan debt for all generations increased by 1.04% from 2022 to 2023. Among these, 21.2 million Gen Xers have more student debt than any other generation. Currently, federal student debt totals $1.63 trillion, and 56.73% of that debt is concentrated within the ranks of Gen X. For many Gen Xers, payments on student loans will likely extend well into the early years of retirement.
“If this legislation is passed by Congress it can negatively impact Gen X because every 12-month increase in the Social Security FRA results in an estimated 6.5% reduction in benefits.”*
For Gen X, The FRA For Social Security Is Now 67
Under Social Security rules, the Full Retirement Age (FRA) is when you’re eligible for 100% of the benefit you’ve earned. For those born in 1960 and later, the FRA was recently raised to 67 which was the cap put into place through a law passed by President Reagan in 1983.
However, concerns about Social Security running out of cash reserves have prompted Senators King (I-Maine) and Cassidy (R-Louisiana) to propose raising the FRA to 70. If this legislation is passed by Congress it can negatively impact Gen X because every 12-month increase in the Social Security FRA results in an estimated 6.5% reduction in benefits.*
Gen X Federal Workers Have The Advantage Of A FERS Pension
In the private sector, Gen X workers were the first to lose guaranteed income from defined benefit pensions like the FERS annuity for federal employees. Starting in the 1980s, 401(k) plans rapidly replaced traditional pensions shifting the responsibility for funding retirement from the employer to the employee. Since 401(k)s depend on market performance, private-sector Gen Xers can lose a significant portion of their retirement savings during a stock market meltdown.
The good news for Gen Xers who work for Uncle Sam is that they have the advantage of a FERS pension in addition to their Thrift Savings Plan (TSP). However, they still need to put a retirement plan in place that accommodates their unique financial needs in a rapidly changing economy. If you’re a Gen Xer headed into retirement, connect with an FRC® trained advisor who understands your federal benefits.
*Source: https://www.ssa.gov/policy/docs/policybriefs/pb2011-01.html
