Each and every day, Generation X moves a little closer to full retirement age. The question is, when will Gen X be able to get serious about actually saving enough for retirement? The youngest among us are approaching forty years old. While the older members of Generation X are solidly in their fifties, we can see the light at the end of the tunnel, financial freedom and retirement are within reach. However, will we be emotionally and financially prepared to leave the workforce behind?
Full Disclosure I’m a Gen Xer, and I’m watching my friends entering their peak earning years. We are old enough to be making some serious money but too old to wait for our baby boomer parents to run into financial trouble in retirement to scare up to act on our own behalf preparing for a dream retirement. The time is now for Gen X to get serious about investing for retirement.
While I’m writing this as part of Generation X, my husband is a Millennial. That being said, my older Gen Xers are already eligible for AARP, a fact I will remind them of at any chance possible. As a group, will we be able to overtake the baby boomers as the wealthiest Generation in America? Time will tell.
An alarming number of GEN X workers have no plan for retirement. Many have not even thought to figure out what they need to do now so they won’t still have to work at 70. Only so many of us can be Walmart greeters. For me, this just isn’t an option; the nearest Walmart is over twenty miles away. In Los Angeles traffic, I could die before I made it there. All jokes aside, I don’t think anything having to do with Walmart is part of your dream retirement.
Is Gen X the forgotten Generation Destined to work forever?
Too rich to not plan for retirement, but too poor to reach many advisors multi million-dollar minimums. What is GEN X to do? Over 60% of us are not working with a financial advisor. Many people are leery of turning to a professional for financial advice. We’ve all seen how our boomer parents were treated by stockbrokers piling on commission and fees. Sold whole life insurance policies and annuities whether they were needed or not. Just plain crappy advice, if you can even call it that. Generation X needs both advice and guidance to help ensure a secure retirement.
Our generation is like the ugly stepchild forgotten between the larger groups – Baby Boomers and Millennials. We receive little attention in the media, but considering the challenges we’ve faced, we’ve done pretty well for ourselves. From the Financial Crisis to DotCom bust, we are still here, and many of us are still investing. Slackers we are not.
With all of our success, we still suffer from a bit of Yuppie-itis. I’ve talked to so many people over the years who don’t know the difference between a big income and building wealth. Too many people are just “showing” their supposed wealth. Far too few are building enough wealth to live a comfortable retirement. Depending on which study you read less than 10% of Gen X have saved enough to be on track for retirement. That means 9 in 10 people are not on track for retirement. We have some work to do people.
Our grandparents could get by with little in retirement savings. They had pensions and modest lifestyles. My Grandpa still listened to records at 90 something years old, and never got around to signing up for cable. His home was paid off long before he retired. Thanks in part to California real estate he passed away worth multiples of the net worth he had when he retired. Oh, by the way, he retired at 60 from a blue-collar profession. Sadly, many boomers will ride into retirement, hoping for this type of security. Some will have some help from pensions. Few if any of us in GEN X can really count on a pension as a major source of income in retirement.
We Can Retire on Social Security, Right?
Did I mention Social Security is reportedly on track to be depleted by 2034 (or earlier)? This is before many the younger GEN Xers will have reached full retirement age. Meaning they won’t be eligible to get their full social security benefits by the time the Social Security trust fund is set to go broke. How do you like them apples?
I don’t have a crystal ball, but I can encourage you to get an estimate of what type of benefit you will get from Social Security. Currently, the average check is something like $1422 per month. That won’t pay for a studio apartment here in Los Angeles now. I expect pretty much everything to be more expensive by the time we retire. LET ME STATE THIS ANOTHER WAY: If you are reading this post, you will not be able to live comfortably on just Social Security in Retirement.
Politics aside do you have faith in the US Government to fix this Social Security problem? Alternatively, find a solution that doesn’t include slashing benefits for retirees? The only other real option would be too great increase taxes in the future for those working, and likely those in retirement. This will only make it harder to play catch up on retirement savings later in your career.
How can you reach your retirement goals?
First of all, set a retirement goal. I love what I do and plan to work forever. However, I’m realistic and want to at least have the choice not to work (at some point in the distant future). I’m sure I’m in the minority, and many of you are counting the days till you reach full retirement age. PS, the full retirement age for those in Generation X is likely 67, plus a few extra months depending on when you were born.
So, what can you do now to increase your chances of reaching your retirement goals?
To start consider working with a fiduciary financial planner to kick start your retirement savings. Gen X is the first generation that will be retiring almost exclusively on 401(k) plans. With the bull market we’ve had the past few years you may feel you can easily do this all on your own. You’ve been taught to be wary of the extra cost when investing. And while an advisor is likely an extra cost, but in my humble opinion, good financial guidance is worth every penny. Vanguard estimates the value of even basic financial guidance at around 3.75%, imagine how valuable great financial advice could be.
There is more to retirement planning than just picking some funds in your employers 401(K) plan. The confidence that many Gen Xers have in their ability to adequately manage their own finances may be impeding their chances of retiring with a secured lifestyle. Hopefully, we will live longer than our parents and grandparents. That means money will need to last exponentially longer. Guidance for setting a vision for what your ideal retirement will look like with professional tax help. Turning that vision into a reality will take accountability and hard work. Avoiding large mistakes when times get rough can be the difference between fabulous golden years, and just scraping by.
Not all advisors are old boring fear mongers
I’m not trying to scare you. Fearmongering is not my preferred way to motivate clients. On the other hand, this is a big issue that you need to take seriously. I can’t tell you how many times I’ve heard from a new client, “thank you for not trying to scare the crap out of us.” Some people in Gen X do need to get a little scared.
What type of Advisor should Gen X work with?
Not all financial advisors are created equally. Some just help with investments, or sell products like insurance, annuities, and mutual funds. Some work as financial planners whose main purpose is to help you plan and reach your personal finance goals. Some work on the fiduciary standard all of the time. Others work as fiduciaries some of the time. Others never work on the fiduciary standard, and just glamorized salespeople.
If someone never works as a fiduciary, well I think you should move onto someone who does. It is also important to know if you are working with someone associated with a Wirehouse (think Merrill Lynch, UBS, Morgan Stanley), stockbrokers, Registered Investment Advisors (RIAs) or other financial professionals. Full disclosure I run my own RIA DRM Wealth Management, LLC as a Fiduciary.
Before you engage a financial advisor, think about the areas you think you need help with. Search for a relationship that you, as an investor, want to have with a financial planner or financial advisor. Some of you are ok with a more one-off checkup type arrangement. Others really may need to have an ongoing accountability partner who helps you stay on track for your important life goals.
If you go the route of work in an ongoing advisor-based relationship is to understand your financial professional credentials. Are they a Certified Financial Planner™? Do they work as a fiduciary? Are they independent? Alternatively, do they work for a firm and sell only those firms products? Are the experts in the areas of advice that are the most important to you and your family? Do they work with other people like you?
What is a Fiduciary Financial Advisor?
Few people know that financial advisors are not legally obligated to put your best interests first. The implementation of the Fiduciary Rule has been delayed several times. It was supposed to go into effect in June 2017. Now it appears to be permanently dead. We are seeing firms who previously banned commissioned products (aka non-fiduciary compliant) from the repertoire of their sales staff, bring them back into the fold.
Being a fiduciary means that your advisor is legally bound to actually put our best interests first. In the past, most advisors just worked on the suitability standard. Under the suitability standard, a suit salesperson would only have to get you into a suit that kind of fits. Under the fiduciary standard, the suit would actually have to make you look good. Either way, don’t take fashion advice from most financial professionals. Some dress well, others are good at math.
I’m not rich yet, can I afford a good financial planner?
While it is true many Wealth Managers and other advisors have million dollar plus minimums. There are a wide variety of service models out there. Technology and competition provide Gen X investors to find the right fit for the retirement planning advice they need. Some groups, like the XY Planning Network, provide varying levels of advice on a monthly retainer model.
Am I too busy to do Financial Planning myself?
I know many of you are still busy raising kids. Some of those kids are younger and some of those kids are adults and may never move out. You also might be saddled with caring for your aging parents. There will always be some reason to put off getting starting saving for retirement. The busier you are, the more value the advice from a financial planner may provide you. If nothing else they can take all this crap off your plate.
If nothing else, please at least take away from this post the importance of getting started. There is never going to be a better time to begin saving for retirement than now. The earlier you were saving, the more of the heavy lifting compound interest can do for you. Translation: the less you will actually have to save out of pocket.
While I fully believe fifty is the new thirty, in terms of retirement planning, this only means your money will have to last a lot longer than you may think. Let compounding interest be your friend, and get your money working for you sooner rather than later. It is not too late to get on track for a better retirement.
