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Retirement Planning > Saving for Retirement

Millennials think they have it bad? Generation X has it worse

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(Bloomberg) — The members of Generation X have plenty to be grumpy about. For starters, no one talks about them anymore. It’s all millennials all the time. There’s another reason Americans born between 1965 and 1980 are gloomy: Gen Xers are in even worse shape financially than the baby boomers who preceded them or the millennials who followed.

Sure, many boomers haven’t saved enough for retirement. And millennials are squeezed by high student-loan debt. But Gen Xers are still paying off student loans while raising families on wages that have barely budged in recent years. They have more debt than other age groups and are more pessimistic about ever being able to afford to retire, according to many surveys.

Almost 40 percent say they “don’t at all feel financially secure,” and 38 percent have more debt than savings, more than any other generation, according to a recent survey of 5,474 Americans by Northwestern Mutual Life Insurance Co. On average, people in their 40s had saved $62,087 in 401(k) retirement plans at the end of 2013, according to the Employee Benefits Research Institute. That means Gen Xers who plan to retire at 65 have a considerable way to go to accumulate the $1 million they’ll need to generate $40,000 a year as seniors.

“Generation Xers are the forgotten middle child generation,” says Faith Popcorn, a trend consultant who advises companies on generational differences. “They’re worried about both the present and future. They understand more than millennials that they could be replaced by robots and a lot of them don’t think they’ll ever be able to afford kids or qualify for mortgages.”

Popcorn says “6 in 10 boomers and millennials think their generations are special but only one-third of Gen Xers do. You wouldn’t want to be a Gen Xer.”

Generation caricature

The term Generation X was popularized by Douglas Coupland, whose novel, “Generation X: Tales for an Accelerated Culture,” was published in 1991. Gen X is a relatively small cohort of about 65.7 million people, compared with about 74.9 million boomers and 75.3 million millennials, according to Census Bureau projections for 2015.

When they came of age in the late 1980s and early 1990s, Gen Xers were depicted as slacker-cynics who listened to grunge music and lionized Kurt Cobain. That was always a caricature. Gen Xers were molded more by ill-timed jolts of economic hardship.

They entered the workforce during the recession of the 1990s and then, just as they were getting their footing, the dot-com bubble burst. As the housing market picked up in the 2000s, some bought homes at high prices only to see real estate values plummet during the financial crisis.

They were the hardest hit generation during the Great Recession, losing almost half their wealth when the stock market slumped, compared with about 25 percent for baby boomers, according to a 2013 Pew Charitable Trusts survey.

“For me and many of my friends, it’s scary not to yet have a decent safety net, and we’re surprised that economically it’s still so hard,” says Jennifer O’Neill, 35, who got an MBA from University of Pennsylvania’s Wharton School five years ago and works in marketing at a large corporation.

Job worries

O’Neill and her husband earn a combined six-figure income from their marketing jobs in New Jersey. But they’re still renting instead of buying a home, something her schoolteacher parents had at her age, because of worries about job security and high housing prices.

They’ve been paying off student loans for the past five years and have five more to go. They try to save 7 percent of their incomes in their 401(k) plans. That leaves them just enough to cover living expenses: Daycare for their two children, ages 4 and 6 months, costs almost $2,500 a month, about what they pay for rent.

“We both have good jobs and are better off than a lot of people but never seem to get to the point where we can build our savings,” O’Neill says. “And because of our student debt, I don’t have the option to stop working while my kids are young even though day care costs are so high.”

No raises

While the stock market has rebounded, real wages, after factoring in inflation, haven’t improved for most employees since before the recession, according to the Economic Policy Institute. Twenty-three percent of Gen Xers received no raise and 26 percent just a 1 or 2 percent bump in the past twelve months. Even millennials got more.

Gen Xers are what economists call a sandwich class — squeezed between raising their kids and caring for aging parents. Forty percent have children under 18 and about one-quarter have a parent or another relative living in their households, Northwestern Mutual’s survey found.

“Aside from weathering a number of economic cycles, this group is juggling home mortgages, educational debt and lifestyle needs,” said Rebekah Barsch, vice president of financial planning at Milwaukee-based Northwestern Mutual.

Life crisis

That’s left 37 percent of Gen Xers feeling “not at all or not very comfortable” about being on track to meet their financial goals, compared with 22 percent of millennials, according to a March survey by T. Rowe Price of more than 5,000 Americans. Just 6 percent of Gen Xers saved 15 to 19 percent of their incomes in 401(k) plans in the past 12 months, the amount recommended by many financial planners, compared with 8 percent of millennials and 10 percent of baby boomers.

A single life crisis can deplete whatever retirement savings Gen Xers have accumulated.

Barry Andersson built his own video and film direction company, Deodand Entertainment, and saved for retirement by acquiring a rental property that has appreciated in value in the last decade. Then he and his wife divorced after 16 years, and she got the property in the settlement.

Now 37, Andersson, who lives in Minneapolis and has two school-age children, doubts he’ll be able to accumulate retirement savings until he’s 43 and no longer supporting his ex-wife.

“I probably won’t ever get to retire,” says Andersson, who still feels lucky he loves his work. “We’re the first generation that isn’t going to do as well as our parents did.”


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