Generation X is the generation born between the 60s and the 80s. They are the generation between the Baby Boomers and the Millennials.
- There are approximately 65 million Gen Xers.
- Currently, Gen X are in the middle of their careers, in what is known as their peak earning years.
- Gen X is going to be the first generation that is less prepared for retirement than their parents.
What Do We Know About Generation X?
Generations are considered to hold similar values due to the circumstances of their upbringing, which likely shape their view of the world. Gen X is considered an in-between generation, similar to the Silent Generation. They lived through the dotcom bust, the 2008 financial crisis, and the Great Recession, so their savings and earning power has been seriously compromised. Due to longer lifespans and a tendency to have children later in life, Gen X is caught in the middle of supporting their adolescent or young adult children and their aging parents.
How Do Gen X Compare to Baby Boomers and Millennials?
- 80% of Gen X believe that they are more unlikely than their parents to achieve financial security. In comparison, 73% of Baby Boomers believe this and 77% of Millennials believe this.
- Gen X is 52% more likely to have credit card debt than the other two generations, Millennials are 26% more likely to have student loans, and Boomers are 25% more likely to be debt-free.
- Only 37% of Gen X are likely to use a financial advisor, compared to 42% of Millennials and 45% of Boomers.
What is Gen X’s Financial Situation
Baby Boomers hold 56% of the wealth in the USA, and Gen X hold 16%. When Gen X were 35, they had half the wealth that Baby Boomers had at the same age. This is likely to do with rising inflation, unmoving salaries, and the financial crisis that have affected their careers.
Famous members of Gen X are Tiger Woods and Jeff Bezos.
Gen X Retirement Savings
On average, Gen X have $64,000 saved for retirement. Baby Boomers have $144,000 saved for retirement and Millennials have $23,000. Shockingly, 9% of American Gen Xers have no retirement savings. Baby Boomers and Gen X believe they will need $500,000 to comfortably retire, so all generations on average fall short of their retirement savings goals.
Gen X and the Stock Market
When Gen X households began working, investing, and saving, they were in the dotcom bubble, which created high market valuations. The bear market that followed the 2008 financial crisis and the dotcom bust has caused significant damage to their stock portfolios. Because of these crises, Gen X is generally more risk-averse than Baby Boomers and Millennials.
Currently, the low-interest-rate environment is affecting the growth of their financial assets.
What Challenges Face Gen X?
Generation X will struggle to maintain the same consumption levels as the Baby Boomer generation. They have on average, reached an age where they are supporting both their parents and their children, further reducing their buying power.
Gen X also have the highest average debt in comparison to other generations; the majority of this is mortgage debt. The next highest debs are student loans, car loans, credit cards, and personal loans.
How Has Retirement Changed for Generation X?
Retirement has changed since Gen X’s parents retired. Pension plans and Social Security have been replaced by private plans such as 401(k)s.
While Baby Boomers have faith in Social Security to provide an adequate retirement that can be supplemented by private plans, Gen X does not have the same confidence. 41% of Gen X believe that Social Security will no longer exist when they reach retirement age.
While Baby Boomers are likely to continue working past the age of 65 because they enjoy work or want the extra income, Gen X are likely to work past retirement age because they cannot afford to retire.
Generation X and Financial Planning
While Gen X have gotten the short straw when it comes to outside influences affecting their financial planning, they can still get their finances in order. Here are our tips for mitigating Gen X’s financial situations:
Create an Estate Plan
If you don’t already have a will, then it is vital that you create one, especially if you have dependents. This will save the distribution of your assets and possessions from being decided by a judge. Contact a lawyer to create a plan for your living will, will, durable and medical powers of attorney, and a living trust in order.
Doing this now can ensure that your family are provided for. Take the time to discuss your wishes with your partner and adult children.
Create a Financial Plan
As we age, our financial plan needs to be more exact as any variables can throw your retirement fund off track. By hiring a financial planner, you can create a financial plan that works for your income, lifestyle, and risk tolerance. You will get a realistic idea of your financial situation and what you need to do to be able to retire comfortably.
Manage Your Debt
Now is the time to get serious about your debt situation. You need to eliminate it and avoid taking on more debt. If you are considering purchasing property, look at a shorter mortgage term such as a 15-year fixed-rate mortgage. You will pay less interest than a longer mortgage and will pay it off before you retire.
College Planning
If you have not already opened a college fund for your children, now is the time to start. If you open a 529 plan or Coverdell Educational Savings Account, then both you and your children can contribute to the fund. A college fund is a perfect way to store inheritance money in a tax-efficient way for your children.
Discuss Finances With Your Parents
Discussing finances can be difficult, especially with parents, but you need to have a full picture of their health and their finances. Discuss their estate plan and help them to get their power of attorneys in place and talk about their wishes.
There are elder law attorneys who can help with situations that require managed-care and power of attorney. Medicare, Medicaid, and Medigap do not cover all of the costs, and you need to understand their medical and long-term care insurance policies. By creating a full picture of their health and finances, you will be able to factor any extra costs into your financial plan.
Set Contribution Rules for Adult Children
If your children remain in your home after graduating high school or return after college, then put a plan in place for contributions. Set out the terms clearly before the situation arises and ask your children to contribute a set amount to rent, bills, or groceries. If your aging parents have moved in with you or require regular care, then you may consider asking adult children to contribute to their care. Supporting multiple generations is a difficult feat without financial support.