Articles

Generation X Looks at Retirement

Only a few years separate those two generations, but according to both conventional wisdom and real data the gap is often profound. A recent CNBC article compiles a range of statistics and commentary specific to retirement planning under a rather bleak headline: “Retirement may be mission impossible for Gen X.”

Skipping over the irony that this pop-culture reference is actually a Boomer-centric one from the late 60's (thanks to a Gen X colleague for that) generational differences are tricky to characterize. Statements such as “Gen X is a transition generation” can be nearly meaningless. ‘Hell-ooo, who isn’t?!’ I can almost hear them complain. But worrisome statistics on employment, income, home ownership, and debt are undeniable, and the sense that they “may get shortchanged in their Golden Years” is palpable.

There’s also plenty of evidence that this pessimism affects behavior concerning retirement. A 2012 Insured Retirement Institute study found that just one-third of those born from 1965 to 1981 were “very confident” about meeting their long-term financial needs. Only 41% have tried to predict how much they’ll need to save. And according to another study, an alarming 15% withdrew 401(k) money during the recession and 23% stopped contributing.

Practical Solutions, Please

So what can be done? Motivational speeches are notoriously ineffective with this crowd. Economic trends are arguably beyond anyone’s control. The growing complexity of the retirement-planning task, however, is one often-cited reason for disengagement that as an industry we can do something about.

If Xers are bewildered by the wide range of investment options and strategies available, professional advice can help. Delivering that advice through the internet may not even present much of a barrier for these younger people. Because they are the first generation to average from three to six 401(k) plans, advice should be able to accommodate all their assets. And because Social Security and Medicare are all but certain to change, advice models should be designed to cope with that kind of uncertainty and still provide meaningful results.

That won’t be all. Not too long ago the best decision tool employers could provide was a sort of slide rule made of folded paper. Now sophisticated financial advice is commonplace. We can’t predict what new technologies will make possible over the next 30 years – but we can be reasonably confident that it will be completely amazing.

It’s About Time

Gen X may have to do without the historic income gains and real estate wealth of their elders, but they enjoy an abundance of perhaps the most precious retirement asset: time.

For someone just turning 30, age 68 is nearly four decades away. That’s a very long time span over which to compound investment earnings. It’s plenty of time for larger changes as well. For example, it’s not inconceivable that by 2050 technology will ease one of the greatest threats to retirement savings by making health care less expensive rather than more so. Or that the economics of long-term care will change fundamentally. Or even that our current, de facto system of employer-sponsored plans, personal savings, and Social Security will evolve into something entirely different. 

Getting Xers to think positively can be quite a challenge. But perhaps they’re actually the lucky ones? Instead of half-blindly picking mutual funds from a menu like in the past, they may be able to enjoy automatic, end-to-end financial management, deeply and intelligently personalized over a lifetime. It’s by no means guaranteed, as we always say in the fine print. But for Generation X it is a very real and exciting possibility.

Is retirement mission impossible for Generation X, or jsut another challenge of modern life? As always, your comments are welcome.