Generation X Struggles with Retirement

Sep 11, 2014 2:09:08 PM / by Jason Shaw

gen x retirement

From bursting the real estate bubble, skyrocketing income gap, the stock market plunge, AND massive student loan debt...generation X has had a lot of economic hurdles to overcome.

It’s not that we’ve been slacking…

The news about Gen X’s preparedness for retirement is less than encouraging.  Their plight is not, however, a result of the “slacker” mentality with which Gen Xers are often branded.  Workers currently in their mid-30s to late 40s have had a number of economic hurdles to overcome, including the bursting of the real estate bubble, a skyrocketing income gap that has been squeezing out the middle class, the stock market plunge, and massive student loan debt acquired at a time when we believed that a good education would translate into a good job.

We have not merely thrown up our hands in the face of these challenges.  A recent online survey shows that, on average, we began saving for retirement while still in our 20s.  However, the survey, titled “Generation X Workers: Retirement Reality Bites Unless Answers Are Implemented,” indicated that despite our attempts to provide for our future needs, we typically are not on track to securing the retirement assets we will need.  In addition to the economic factors mentioned above, many of us are caring for aging parents and/or trying to save for our children’s higher education at the same time that we need to be thinking about securing our own futures.  The more we try to take care of others, the less is left to save or invest.

A 2013 study by Wells Fargo found that the younger middle-class members of Generation X are making better progress toward securing their retirement than their slightly older counterparts.  They came into the workforce with a clearer picture of the current economic realities surrounding retirement and, because they were unlikely to have had money in the stock market during the post-dot-com crash, they have generally had less apprehension toward equities investment.

Forty-somethings, however, were caught in a time of transition in how we think about retirement.  Defined benefit plans were being phased out, and 401(k)s had not yet caught on. While only about 19.5 million workers participated in 401(k) plans in 1990, that number had climbed to 42.4 million by 2003.

It’s not too late.

Yes, Generation X has been dealt a bad economic hand, but it still has time to build assets during its prime earning years.  Generation X is at an age where its workers have had some time to establish themselves in their careers and build earning potential, and its oldest members still have around 15 years until retirement.  Additionally, the expansion of student loan repayment options and forgiveness opportunities, such as the Pay As You Earn program, is giving many workers more breathing room in their budgets and allowing them to allocate more to savings and investments.

So, what can we do to get our retirement planning on track?  Use this checklist to make sure you have your bases covered and are making the most of these powerful earning years.

  • Get paid what you’re worth!  Tough job markets have left many workers happy to be employed at all, and even happier to be working at jobs they enjoy.  If you are not standing up for your monetary worth, however, you are shortchanging your future.  Forbes offers tips for getting fair compensation for the work you do.
  • Get help with tax planning.  Earning what you are worth is one thing; keeping it is another.  To get the most out of the money you are earning at the peak of your career, work with a tax planning professional to ensure you are not handing more of your paycheck to the government than the law requires.
  • Fine-tune your budget.  Pay off high-interest debt that might be draining your resources is monthly interest payments.  Understand what you are spending each month and how you are spending it.  Look for nonessential expenses that you can reduce or eliminate, and put the newly available cash into savings or investments.  If you don’t yet have at least three months of expenses saved in an emergency fund, work on building that before investing.
  • Evaluate your retirement strategy with a qualified financial advisor According to Forbes, only 35% of Gen Xers use the services of a financial planning professional, who can provide expert advice on retirement needs, progress toward financial goals, and ways to take advantage of tax benefits for retirement savings.
  • Review your insurance needs.  Most people in this age range already have life, health, auto, and home insurance in place.  One expense that workers tend to underestimate, however, is long-term care costs.  Consider a long-term care plan before it’s too late; they tend to become prohibitively expensive, if not impossible to get, for applicants over 60.  Speak to your professional financial advisor for alternative ways to save for long-term care costs as well.

For help getting your retirement planning on track, call the professional financial and tax advisors at Boelman Shaw Tax & Financial Planning.  Request a free consultation to find out how our services can help you rise to the Gen X retirement challenge.

Tax and accounting services provided through Boelman Shaw & Company, LLC. Advisory services provided through BSC Capital Partners, LLC a state of Iowa registered investment advisor.

Topics: Financial Planning, Retirement

Written by Jason Shaw