Each generation faces its own unique set of obstacles when it comes to building wealth and growing their net worth—Generation X is no different. Dubbed the “lost generation,” this group of the population is sandwiched between two of the largest and most notable generations—millennials and baby boomers.
Average net worth of Generation X
Generation X, or Gen X, is made up of individuals born between 1965 and 1980. The older members of this generation are in their late 50s and at the tail end of their careers, while the youngest are in their early 40s and entering their peak earning years.
According to the Federal Reserve’s 2019 Survey of Consumer Finances, Americans between the ages of 42 and 57 have an average mean net worth that ranges between $436,200 and $1.1 million.
What makes this generation unique is that their average age makes them both old enough to be financially responsible for elderly parents and young enough to still be supporting young children. For many Gen Xers, this has posed a unique set of challenges as it relates to building and maintaining their net worth.
How does Gen X’s net worth compare to other generations?
Compared to other generations, the average Gen Xer’s net worth is on the higher end. Having had more time in the workforce than younger generations means that they’ve been able to reach higher income levels, while also having time on their side in the investing game. Average net worths also tend to taper off among retired individuals who are older than Gen X and have started to live off their retirement savings and investment income.
Where this generation falls short is in retirement savings, partly due to a rise in inflation and the cost of living.
According to recent research from State Street Global Advisors, this generation is more concerned about the effects that inflation, the stock market and economy could have on their personal financial situation. A study by the Transamerica Center for Retirement Studies found that only 22% of Generation X workers are “very” confident they will be able to fully retire with a comfortable lifestyle and just 28% “strongly agree” they are building a large enough retirement nest egg. Almost 80% are concerned that Social Security will not be available to them once they hit retirement age.
Gen X median annual earnings
On average, Gen Xers between the ages of 45 and 54 earned the highest median income in 2021 at $97,089. Younger Gen Xers under age 45 had a median income of $90,312, while the oldest members of generation (those between 54 and 57) had a median income of $75,842. An almost six-figure income is much higher than some of the younger generations, but Gen X carries the most debt out of any generation—severely hurting their ability to grow their net worth.
What has shaped Gen X’s net worth and financial future?
Gen X’s finances and long-term wealth have been impacted by a number of events over the course of the last few decades. A few of the most notable include:
The dotcom bubble
In the late 1990s, when Gen Xers made up a large portion of the workforce, an overvaluation of early tech companies fueled by speculation of their success led to a bubble burst. Many young tech companies began to go under after overpromising and underdelivering. This led to a slew of losses for investors and job losses for those in the startup tech space.
The Great Recession
From 2007 to 2010, Gen Xers felt the impacts of a weakened economy in more ways than one. The median net worth of Gen X households declined 38% from $63,400 to $39,200, according to Pew Research. Gen X homeowners also saw the steepest drop in home equity during this time as well as a loss in financial holdings due to plummeting stock prices.
The COVID-19 pandemic
As the COVID-19 pandemic turned the world and the labor market upside down, many Gen Xers found themselves switching careers, leaving the workforce to care for their parents or guide their children through remote learning. One study by Prudential found that 26% of respondents had an income disruption (including furlough and reduced compensation or work hours), and nearly one in five saw household income fall by half or more in the first few months of the pandemic. Among Gen Xers, 22% reported that their household income fell by 50% or more.
3 ways Gen Xers can build their net worth
It’s never too late to start making sound financial choices that can set you up for a more stable future in your later years. For Gen Xers who are hoping to course correct and supercharge their wealth-building, they can use some of the following tips to do so:
- Avoid lifestyle creep. In your higher-earning years, you may be tempted to spend more on your lifestyle than you did when you were at the start of your career. Practicing some restraint in this area could help you save and invest more for later. “As income grows, some 40-somethings are tempted to try to “keep up with the Joneses” by moving into a bigger home, joining a country club, driving exotic cars or going on expensive vacations,” says Paul Deer, CFP at Personal Capital. “It’s okay to enjoy the fruits of your labor, but keeping expenditures like these in check will go a long way toward building net worth during this life stage.”
- Pay down outstanding debt. Debt, particularly high-interest debt, can make it difficult to save and invest. Make a plan for how you plan to tackle any debt balances that are weighing on your monthly budget. Choose a strategy you can stick to that takes into consideration the type of debt you have, your interest rates, and your money goals.
- Protect your future nest egg. You can’t predict when you might experience some sort of medical emergency, and health care treatments can be costly. “Even though old age seems far away, the time is now to set up your long-term care plan,” says Molly Ward, a financial adviser with Equitable Advisors, based in Texas. “Odds are that 70% of people trigger a long-term care event. Make sure you are properly covered before it is too late to qualify for [this] insurance…it could be cheaper to obtain this coverage at this time.”