Generation X has fallen behind Millennials in retirement savings, and the future is looking bleak for the generation that came of age in the 1990s. Gen-Xers have the highest level of financial insecurity of any generation, with more than 80% saying they don’t have enough saved for retirement. It’s no surprise, then, that so many in this age bracket prefer not to think about the future. Forty-five percent say that retirement is too far away to think about, even though the older members of this generation are only about a decade away from retirement.
So what’s behind these numbers? Is Generation X just lazy? Hardly. A complicated picture of a struggling generation is beginning to emerge.
Unrealistic Retirement Expectations
Generation X’s parents were the last generation to get reliable pensions that made retirement affordable—and even easy. This left the members of Gen-X with unrealistic perceptions about the ease with which they could retire, the extend to which they could rely on employer pensions and other incentives, and the amount of work necessary to retire. Add in the problem of lagging wages and the longer trajectory to a fruitful career and it becomes clear that Generation X members earn less, and save for shorter periods of time.
Errors in Perception
The members of Generation X have resisted traditional signs of getting old. They dye their hair, stay on top of fashion trends, and listen to “young” music. They don’t see themselves as old, and don’t see themselves getting old any time soon. They also don’t see themselves as old enough to retire, or even old enough to contemplate retirement. The result is a generation that is woefully unprepared for the future. Gen-Xers need to realize—and realize now—that they, like everyone else, will one day be old. Ignoring this fact won’t make it go away, but it will absolutely make retirement less pleasant when it finally arrives.
Millennials have struggled more than any previous generation to get jobs in the wake of the Great Recession. Perhaps that’s why so many experts have failed to notice the struggle many Generation X members face. This generation was hit the hardest by the Great Recession, which struck just as their earnings should have been peaking. The result? Many Gen-Xers continue to live paycheck to paycheck. It’s easy to fault them for their failure to plan, but the truth is that if you’re not making enough money, you can’t save enough either.
Longer educational trajectories and delayed childrearing led many Gen-Xers to delay buying their first home. That means some will still owe on a mortgage at retirement. Others are scrambling to get their debt under control. Add in the housing bubble that hit in 2007 and you have a recipe for lagging home values and soaring mortgage payments.
Gen-Xers who want to get ahead have one option as they age into retirement. Those who are over 62 and own their own homes can tap into their home’s equity with a reverse mortgage. This loan offers money that doesn’t have to be repaid so long as you remain in your home and comply with the loan’s terms. For Gen-Xers who want a small cushion in the future, this could be a good bet.
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