Gen X and Late Baby Boomers Face Bleak Retirements

People born between 1956 and 1975 may be the first to fare more poorly than previous generations.

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Unless Gen Xers and late baby boomers are able to make big changes in their savings, spending and debt habits, they are on track to become the nation's first generations to fare more poorly than earlier groups of retirees, according to a new study from the nonprofit Pew Charitable Trusts. At the same time, early baby boomers who have already reached traditional retirement age are in relatively good shape for their later years.

Pew looked at five groups of Americans and measured each group's financial losses from 2007 to 2010.

Depression babies – born between 1926 and 1935 and now 78 to 87 years old; median net worth was $207,500 in 2010 and had not changed from 2007.

War babies – born between 1936 and 1945 and now 68 to 77 years old; median net worth in 2010 of $212,300, down about $53,500 or 20 percent from 2007.

Early baby boomers – born between 1946 and 1955 and now 58 to 67 years old; median net worth in 2010 of $173,480, down about $67,850 or 28 percent from 2007.

[Read: What Are Your Real Retirement Costs?]

Late baby boomers – born between 1956 and 1965 and now 48 to 57 years old; median net worth in 2010 of $110,870, down $36,800 or 25 percent from 2007.

Gen Xers – born between 1966 and 1975 and now 38 to 47 years old; median net worth in 2010 of only $41,600, down nearly $33,500 or 45 percent from 2007.

Pew's study measured how all groups' total assets – investments, home equity and other holdings – fared in the 20 years leading up to the recession and from 2007 to 2010.

Pew found that Gen Xers were in poor financial shape entering the recession and had suffered the largest hit to their net worth as of 2010. "Gen Xers lost nearly half (45 percent) of their wealth, an average of about $33,000, reducing their already low levels," according to the Pew report.

At the same time, Gen Xers have taken on more debt than older generations. They had a median debt of $80,000 in 2010, which was more than $20,000 higher than the debt of the next highest group. Depression babies had virtually no debt as of 2010, and war babies had only about $10,000. Early boomers had less than $40,000 in median debt and late boomers about $60,000.

[Read: What Gen X Doesn't Know About Social Security.]

Based on a detailed snapshot of personal finances as of 2010, Pew projected each age group's retirement income when members of the group were between 60 and 65 years old – at or near retirement age. It did so by determining each group's retirement income as a percentage of its preretirement income. This ratio – known as the replacement rate – was only 51 percent for Gen Xer single women and couples and 58 percent for single men.

It was 84 percent for early boomer couples (83 percent for single men and 69 percent for single women) and 60 percent for late boomer couples (60 percent for single men and 64 percent for single women). A replacement rate of 80 percent is widely used as the threshold for financial sufficiency in retirement, and many advisers recommend higher rates as a goal.

While Gen Xers have fared poorly, the Pew analysis concluded that early boomers have emerged from the recession with their retirements largely intact. "Early boomers' wealth, financial net worth and home equity . . . put them ahead of where Depression and war babies were at the same ages, and their replacement rates suggest that, even after the recession, they are well prepared for retirement," the study concluded.

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"The evidence strongly suggests that early boomers may be the last generation on track to exceed the wealth of the cohorts that came before them and to enjoy a secure retirement," Pew added. "As policymakers focus attention on Americans' retirement security, particular consideration should be paid to helping the youngest cohorts change course and prepare for financial security over the long term."

The Pew study did not include data from after 2010, and officials acknowledged that gains have occurred between 2010 and 2013. But they noted the impact would be felt unevenly within and across age groups, depending on a person's debt level, the extent of his or her participation in the stock market and whether a person owned his or her home.