Generation X – the group of Americans born between 1965 and 1980 — is often referred to as the “Forgotten Generation.” It’s a smaller group than both the Baby Boomers that came before and the Millennial generation that followed.

With the oldest members of Generation X soon approaching retirement, it’s important to look at where they stand financially. New research from the National Institute on Retirement Security (NIRS) finds that many members of Gen X are struggling to meet retirement savings targets and risk having a significantly lower standard of living when they stop working.

Access to employer-sponsored retirement plans

According to the NIRS researchers, the decline in the number of employers offering defined benefit (DB) pension plans is a major factor in Gen X’s retirement readiness. In 1980, more than 80 percent of workers in the private sector had access to a DB plan, according to the U.S. Bureau of Labor Statistics.

Today, few private employers offer pensions to their workers. Most employees only have the option to save for retirement in employer-sponsored defined contribution (DC) plans like 401(k)s or on their own in individual retirement accounts (IRAs). According to NIRS, just 14 percent of Gen Xers were participating in a DB plan as of December 2020.

The potential challenge of relying solely on DC plans is a person’s retirement income depends on how much they contributed over the course of their working years and the investment gains they may have earned over that time.

Since Generation X was the first generation to enter the workforce when DB plans were on the decline, they’re the first to see the effects of that shift on their finances on a large scale.

Generation X’s retirement readiness

The NIRS researchers found that just over half of Gen Xers participated in an employer-sponsored retirement plan in in 2020. Of those contributing to a private account like a 401(k), the average balance was $129,994. The median account balance, which isn’t skewed by high earners, was $10,000 for individuals and $40,000 for households.

Additionally, 40 percent of Gen Xers have accounts with no balance at all, according to NIRS.

The researchers warn that retirees who don’t have enough savings to live on will have to rely on Social Security, which wasn’t designed as a full income replacement. In 2023, the average Social Security benefit is about $1,700 a month.

It’s not all bad news, however. The youngest Gen Xers are in their early 40s, which are often a person’s prime earning years. That means younger members of the generation still have time to bolster their savings and improve their retirement security.

How PERA combines the best of DB and DC plans

The State of Colorado created PERA in August 1931 and since then, PERA has grown to include DB and DC offerings covering more than 670,000 current and former public employees.

The PERA Defined Benefit Plan is available to all PERA members and is designed to provide lifetime income in retirement. The average monthly benefit was $3,238 in 2022.

Some members have a choice between the PERA DB Plan and the PERA DC Plan, which features a variety of low-cost investment options for members who want to invest their retirement funds on their own. Members can also annuitize their account balance at retirement to convert it to regular monthly income.

PERA also offers the optional PERAPlus 401(k) to all members, and some PERA employers also offer the PERAPlus 457 Plan. Both are low-cost options for setting aside extra money for retirement, and both have Roth options for saving after-tax dollars.

Together, PERA’s defined benefit and defined contribution plans help ensure that Colorado’s public employees have the income they need in retirement, regardless of which generation they’re a member of.