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GenXers Need Your Help

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Though they remain ambitious in their long-term investment goals and expect a somewhat early retirement, Generation X (GenX) investors, the 52 million Americans born between 1967 and 1981, are far from properly prepared, according to the Third Annual GenX Survey released in mid-June by the MainStay division of New York Life Investment Management LLC.

Seventy-seven percent of respondents characterize their savings objectives as “equal to” or “greater than” their parents’, and 61% say they expect a higher standard of living in retirement than their parents. Yet, in light of Wall Street scandals, market losses, and economic uncertainty, the study found that the percentage of GenXers who stopped investing has more than doubled, from 4% in 2002 to 11% in 2003.

As a result, only 59% of today’s GenXers own non-retirement assets, down from 70% in 2002. The top reason cited is “lack of funds” (58%), followed by “inadequate experience making financial choices” (29%) and the perception that they “lost too much money in the past 12 months” (11%).

“GenXers have been shaken by the prolonged recession and unstable job market,” notes Beverly J. Moore, managing director of NYLIM Retail Markets. “This has created a bias toward security, driving GenXers to reallocate their portfolios in favor of predominantly conservative financial products.”

However, GenXers remain less conservative in their investment choices than either Baby Boomers or seniors. According to the survey, 31% of GenXers describe themselves as “conservative” investors, versus 45% of Boomers and 53% of seniors.

Despite GenXers’ newfound caution, about a third said they were availing themselves of the services of a financial advisor, a number that has remained flat. “GenXers feel they need a comprehensive financial plan,” Moore says, “but they aren’t getting one,” partly because advisors have been focusing on the Baby Boomers. “But we feel the GenXers are a very attractive group” for advisors, says Moore. “We know life expectancy is 89, and GenXers want to retire at 60. And while they are saving more than their parents do, they are not saving enough to retire.”

Other survey findings of interest:

o Under-funded: More than half of GenXers (58%) feel they don’t have enough money to invest, up from 45% in 2002. Twenty-nine percent believe they don’t have enough experience to make smart investment decisions, up from 23%.

o On their own: The majority of GenXers feel neither the government nor their company retirement plan will support them in retirement. More than three-quarters (76%) discount the impact of Social Security and almost half (48%) are bearish about their company retirement plans.

o Trending to the right: Over the past twelve months, GenXers have grown more conservative in their investment behaviors and attitudes. Nearly one-third (31%) of GenX investors now describe themselves as “conservative,” up from 22% in 2002. Similarly, the percentage of GenXers describing themselves as “aggressive investors” declined from 20% in 2002 to 17% in 2003.

o Financial insecurity: In 2002, more than 60% of GenXers believed their families would be financially secure in the event of terminal illness, disability, or death. Only 52% concur this year, a decline of almost 15%.