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Financial Challenges and Solutions for Generation X Part 1

By Jane Young CFP, EA

Generation X, comprised of individuals born between 1965 and 1980, is sandwiched between Baby Boomers and Millennials.  In the United States Gen Xers represent 20% of the population; 66 million people between the ages of 41 and 56.  As the oldest segment of this generation approaches 60, they need to get serious about planning for their financial future.

Unfortunately, many Gen Xer’s feel stressed about their finances.  About 75% make more money than their parents, at the same age, but they face more financial challenges.  Based on an annual survey by TransAmerica, the median retirement savings for a Gen Xer is $66,000 and only 14% are “very confident” that they will be able to fully retire with a comfortable lifestyle.

They carry too much debt. According to a study by Creditcards.com, their average debt burden is $134,323 compared to the national average of $93,466.  Many have sizable credit card balances, 401k loans and inadequate emergency savings.  They are struggling to balance the need to save for the future while meeting current living expenses.

Some of their financial challenges are due to unfortunate timing.  Many started their careers during the recession in the early nineties and later experienced the tech bubble crash in 2000.  This was followed by the housing crisis in 2008 that lead to the Great Recession.  This resulted in a significant market crash followed by high rates of unemployment causing many to dip into savings and take on debt.  

In addition to economic upheaval, Gen Xer’s started their careers when most companies stopped providing pensions and started offering 401k plans.  Unfortunately, during this transition, early 401k plans were not as common or beneficial as those offered today.  An employer match was rare, they charged exorbitant fees and investment choices were limited.

Additionally, many Gen Xer’s are financially challenged by the need to care for children and aging parents at the same time.  A study by Northwestern Mutual found that over 30% of Gen Xer’s are caregivers for aging family members.    

While this generation has been financially impacted by many outside forces, studies show that Gen Xer’s spend more than other generation on discretionary expenses.  According to Forbes, Gen Xer’s spend 11% more than Boomers and 33% more than Millennials.   They are also less focused upon and spend less time on their finances.

 Fortunately, Gen Xer’s are in their prime earning years and still have time to catch up.  Many do not think of retirement in traditional terms and plan to continue working beyond age 65.  Part 2 of this article will address tips to help Gen Xer’s prepare for retirement.

 As a bonus, Generation X is expected to replace the Baby Boomers as the wealthiest generation when nearly $48 trillion dollars is passed down over the next 25 years.  While some will benefit from this, one should not count on receiving an inheritance to provide them with financial security.