Last week MSNBC had an interesting article titled For Gen X, Time to Grow Up and Get a Broker. This generation had a somewhat negative image when we were kids, but as the article points out, most of us in this generation have outgrown that image and moved on to be at successful points in life. Even so, many people in their 30s are still behind when it comes to retirement savings.
Melanie Keller, 35, admits that fact. She worries about retirement because she only has $3,000 put away in a 401(k) plan and has no other investments. But instead of socking away money for retirement, the pharmaceutical saleswoman is trying to save $60,000 so she can buy a starter home where she lives in San Jose, Calif.
Melanie is a very typical example. She has an established career, is trying to save money to buy a house, and is probably already married, or planning on getting married and starting a family soon. With so much going on as it is, saving for retirement has taken a back seat.
One reason that many Gen Xers have trouble getting started early with retirement savings is because of debt, usually student loans:
Even if they are not supersizing their lives and living beyond their means, she said, many Gen Xers â’ generally defined as those born from 1965 to 1980 â’ carry significant debt due to college alone. Once they have kids, they begin to worry about saving for their college educations, and retirement planning often drops in priority.
This is very prevalent with people I meet with who are in their late-20s or 30s. In some cases, these individuals have upwards of $75,000 in student loan debt still, and if they are married to someone who also has student loan debt, this can be a huge burden. Factor in some regular credit card debt, trying to buy a house, and all of the other financial issues in life and it is easy to see how retirement can get overlooked.
Oppenheimer Funds also did a survey and found:
- 62 percent say they live paycheck to paycheck
- 56 percent have an outstanding credit-card balance of $3,000 or more.
- 62 percent of women say they have not bought any investment products.
- 45 percent of women would buy 30 pairs of shoes before saving $30,000 in retirement assets.
- 65 percent of women and 48 percent of men said they do not know how a mutual fund works.
- Nearly 65 percent did not know that when interest rates go up bond prices typically go down.
- 38 percent of women have not started saving for retirement.
Improving These Statistics
The only way to improve these statistics is through education and a willingness to learn. You don’t have to read a bunch of books on finance or create complicated investment strategies to reach your goals, but you do have to pay attention to your situation and take action. We all have bills to pay, debt, housing costs, a vehicle, and so on. These are all very important, but so is saving for the future. It doesn’t have to be an issue of sacrifice, but understanding how a little bit as soon as possible can go a long way towards funding your future.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
Finally regarding MSNBC's "For Gen X, Time to Grow Up and Get a Broker" - I dont know all about it - but X'ers are going to be in a short supply of productive workers. So they would rather let computers do the broker job and use people elsewhere. As it turns out, most of X'ers dont mind keeping their nest egg on internet banking systems and use internet brokerages.
Oh and one more - the significant importation (legal immegration) of the high tech workers around Y2K - kind of falls into the Gen X as well and a lot of them ended up staying. This somewhat evens out the effect of this big ripple - but I guess the numbers are just a drop or two in the bucket.
Considering that the birth rate hit lowest in 1970-72 range - the lowest demand for housing will be when these folk turn 35+ (ready to buy house) - and housing crash came about same time. Scary!! But guess what - those born around this period will retire say at 70 yrs in 2040 - the increasing number of productive workers behind you would have paid quite a bit into the system that can potentially take care of you!!!!!!!! Unless - we have used up all the gasoline and warmed up this planet to a point of no return.
Advice from a Boomer: With a $72 trillion unfunded liability in Medicare/aid and Social Security, you need, as a generation, to press politicians for reform of the entitlement system like... yesterday. Take a look at your pay stub sometime and just think about what you could do with the FICA tax that the government confiscates from you. How anyone of your generation can vote for a national political candidate whose platform is even more government and yet more taxes is quite beyond my understanding. Don't worry though, I'm retired and I saved. Also, don't worry about the irresponsible Boomers, they deserve everything they will get. Or as a now notorious person has said, their chickens will come home to roost. Best of luck to you all.
The only way to improve these statistics is through education and a willingness to learn.
No, more income would also help imrove thesae statistics. I know how a mutual fund works but what use if that with no money? I don't need education or a willingness to learn, I need income.
How many pairs of shoes does the average person wear out? I can easily see myself buying 30 pairs of shoes in 30 years, but I can't see myself saving $30,000 in 30 years.
Based upon the scary stats that have been posted, I believe that it is safe to say that Gen-X has a priority problem. While it is no sin to enjoy some of the finer things that life has to offer...like a good pair of shoes, I think that now is the time to begin looking into other avenues of savings outside of the 401-k. I would even focus my attention on building a money market emergency cash fund as our economy is becoming very unstable. It is time to cut back on the luxuries and focus more on the necessities. Even a blind man can see the uncertainties ahead.
Most of my Gen X friends' savings efforts are crippled by their huge amounts of student debt. My own student debt is fairly significant but I'm working on a second degree. We'll all still being payments on our student loans when its time for our kids to go to college.
I think it's not just this overused and weak descriptor of "GenX" in trouble, but many people in America who've gone full blown into consumerism and spending, leaving nothing for the future.
I'm still digging for details on the survey, all I've found is that it was released June of 2006. If I can find out more info about how the survey was conducted, I'll post it here. But it sounds like they did target 26-39 year olds (as of 2006).
As far as the birth years, that is something that is up for debate. Essentially it covers everyone born in the 70s to as early as the late 60s and possibly some of the early 80s.
The most common years used are 1965-1980. Ultimately, I don't think the actual years have much to do with it. The generation classes are more or less used to describe the attitudes, values, and behaviors of a certain demographic. So, even if you were born a few years outside of what might classify you as part of that generation, depending on your surroundings when you grew up, you might have taken on the values of those of Gen X, even if you technically fall into another category.
I see this shift happen a lot in those born from about 1978-1984. I know some of those burn in 78 who act like, and come off as a classic Gen Y, while some people born in 84 are just the opposite and act like someone in their late 30s.
So it is hard to just say that because you were born in a certain year it makes you part of that particular generation, because I think a person can develop, especially at a young age to take on the behaviors of a particular generation based on many environmental factors.
Did the Oppenheimer Funds survey target Generation X?
By the way, what is your working definition of the birth years that enclose Gen X?
I'm just outside of Gen X (b. early 1982), but I and my peers fall into the same problems - there are too many things we need money for NOW - house payments, day-to-day expenses, and crippling amounts of student loans.
I happen to have just under $5k in a 401(k) after contributing for less than 2 years... but as my expenses grow, I'm not sure if I can keep up with that (paltry) level of retirement savings.
I can't speak for my whole generation - but my general feeling that this article is accurate. It's not everyone, but there are many thirty somethings that make purchases based on if they can afford the monthly payments. Once you get used to the idea of massive debt (student loans is a big start) every other payment can surely seem inconsequential.
I just noticed that I'm the last year of Gen X!!!
I actually always think whether or not I'm saving TOO much by being too frugal (cheap)! I guess I have a different set of problems than most people since I maximize my 401k plus I save a big chunk of my income.
However, every time I think about the fact that I will need to buy a house, all these thoughts are out the door since houses are soooo expensive!
Right, I think the shoes comparison just points out that some people value immediate gratification through a few tangible goods more than a savings that could help provide financial security for years to come.
Wow. Those stats are scary. Now I have a bad feeling that my retirement earnings are going to be heavily taxed to bail out those who didn't save.
I am so grateful right now that I grew up in a family that talked about money and learned early to invest and save.
As for the shoes question, 30 pairs of good quality women's shoes would cost closer to $2400 - $4500, depending on her taste and if she shops at bargain places or not. Anyway, I think the question had more to do with attitudes towards money as opposed to the amount of money spent/saved.
What on earth does 30 pairs of shoes and 30,000 saved have to do with each other? 30 pairs of shoes costs what? $1500? Whoopdy doo.
Danny, sadly it isn't just a Gen X problem, but the boomers are in dire situations as well. You'd be shocked at the number of people I meet with who are planning on retiring in under 5 years, yet have less than $50k in retirement savings.
Sure, they might get 1,200/month in SS and maybe a few hundred a month from a pension, but that won't allow you to do much during retirement.
That is why it is so vital for this generation to get on the ball so that we they aren't in a similar situation. the 27-40 year old range of people still have time to really make some headway, but that window closes faster than most people realize.
You know whats weird, I saw that article too, and I immediately thought of your site since it talked about Gen X specifically.
Those stats are staggering. I remember reading somewhere that the average 50 year old American has a 40k net worth, including home equity. Scary stats