Retirement Planning Reality Bites for Generation Xers

Generation Xers are struggling more than other age groups with retirement planning, according to a generational study conducted by Financial Finesse. Hit particularly hard by the recession, they are juggling the twin needs of saving for retirement and the immediate needs of raising a family and other major financial obligations such as paying a mortgage.

The retirement planning attitudes of those between 30-44 are rooted in this generation’s “Here we are now; entertain us” ethos, observes Liz Davidson, CEO and founder of Financial Finesse. “Millennials entered the workforce during a time when it was ‘cool’ to be thrifty,” she said in a statement. “Gen Xers lived in the shadow of the Boomers and have a generally cynical attitude toward achieving their goals.”

Grappling with such critical financial planning issues as money management, college planning, investing and retirement planning, Generation Xers receive the lowest financial wellness score 4.6 put of 10 out of all the age groups surveyed by Financial Finesse. They are, the report finds, the least likely to have a handle on their cash flow, an emergency fund, regularly pay off credit card balances in full, and be comfortable with the amount of their non-mortgage debt.

Why is retirement planning such a challenge for this age group? The economic collapse had a devastating impact on Generation Xers. A recent census report found that this age group saw a 59 percent decline in median household net worth between 2005 and 2010, the largest drop of all age groups. A Pew Research Center study found that Generation Xers are 44 percent poorer than their counterparts of the same age in 1984.

More than six-in-ten Generation Xers are married, have minor-age children and own a home. They are most likely balancing saving for the future and paying down debt while trying to meet daily family financial obligations. No wonder, the report observes, that those with minor children report significantly higher stress than those without: Estimates put the price tag of raising a child at about $300,000, which does not include college.

When it comes to saving, the Generation Xer spirit is willing. The report quotes an article that Greg Hammill of Farleigh Dickinson University’s Silberman College of Business wrote for FDU Magazine, in which he notes that this skeptical generation is predisposed to self-reliance.  

But perhaps their biggest obstacle to retirement planning is this age group’s level of debt. While 89 percent are saving in their employer’s retirement plan, nearly half—the most of any generation—indicated they were uncomfortable with the amount of debt they’ve accumulated.

Another are the relatively high financial obligations they face “without the safety net provided by (the more established) Boomers’ assets or the Millennials’ ability to get financial support from parents.” During the recession, 15 percent of Generation Xers made early withdrawals from their retirement accounts, while 23 percent stopped contributing to those accounts, and 22 percent stopped contributing to college accounts, according to a report this year by the Insured Retirement Institute.

It is imperative for Generation Xers to step up their retirement planning as they will face impending Medicare and Social Security shortfalls without the benefit of time that Millennials have for their savings to compound and grow.