Baby boomers get all the attention — but Gen X ‘faces an even greater retirement crisis.’ Here's how to prep your ‘war chest’

That means Freedom 55 isn’t a reality for most Gen Xers, like it was for their parents. Throw in uncertainty about the future of Social Security, and the prospect of a comfortable retirement seems out of reach for many.

Gen X (those born between 1965 and 1980) will have to rely heavily on their own retirement savings. But, with the S&P 500 heavily weighted toward a small number of AI companies, there’s also fear of an ill-timed market crash.

Reality bites for Gen X

Gen X has faced eight recessions, student-loan burdens and high housing costs, which has “constrained savings during peak earning years,” according to the Retirement Income Institute report. At the same time, only 14% of Gen X workers have a traditional pension.

“They witnessed the bursting of the dotcom bubble in 2000, immediately followed by the economic shocks associated with the terrorist attacks of September 11, 2001,” according to a whitepaper from Corebridge Financial.

This was followed by the financial crisis of 2008, the cryptocurrency crash of 2018 and the COVID-19 pandemic, “which led into the highest levels of inflation in over 40 years.”

Since Gen Xers are less likely to have a traditional pension, they might be expecting Social Security to fill in the gap.

But, without reform, the Social Security trust fund — which is used to pay retirement benefits — is projected to run out in late 2032, according to the Social Security Administration’s annual trustees report. This could result in a 20% benefit cut.

This makes Gen X much more reliant on their own savings and investments. But many Gen Xers don’t have enough savings, with 37% of Gen Xers delaying retirement due to finances and only 41% believing their savings will last a lifetime, according to the Retirement Income Institute report.

Corebridge Financial found that one in five (21%) Gen Xers expect to work until 70 or later before retiring.

While working longer means you have more time to save for retirement by contributing to 401(k)s and IRAs, there’s also concern about an imminent market crash. Consider the dotcom bubble burst of 2000, when Amazon shares lost more than 90% of their value and took almost a decade to fully recover.

What goes down usually comes back up — like it did with Amazon — but Gen Xers closing in on retirement may be squeezed for time.

How to protect your retirement

Many Americans are heavily weighted in S&P 500 mutual funds and ETFs. And, right now, they’re enjoying record gains.

But it’s also making some investors wary of a crash — especially since the top 20 stocks command half (50.8%) of the index’s total market capitalization, according to J.P. Morgan.

The firm’s strategists warn that “this creates a systemic risk factor where a single earnings miss or a shift in AI sentiment among the ‘Top 20’ could trigger a de-leveraging event capable of pulling down the entire market, regardless of the health of the remaining 480 companies.”

A Gen Xer with a portfolio heavily weighted toward AI companies could be more vulnerable to a market drop if they’re planning to retire in the next few years.

“History shows that markets recover, but retirees don’t get to choose whether that recovery takes one year or several,” Ernie Cave, founder of Cave Wealth Management, told CNBC.

This is what’s referred to as the sequence-of-returns risk, where poor returns in early retirement limit the portfolio’s ability to recover — essentially locking in those losses.