It sometimes seems that it is impossible to open up a newspaper or to turn on the television without hearing something about either baby boomers or millennials. Granted, they do make up the vast majority of the U.S. population and for that reason alone, they arguably deserve the attention.
However, sitting quietly between these two generation powerhouses sits the lesser known Generation X. Loosely defined as those who now between ages 37 to 52, Gen X is squarely sandwiched between the boomers and millennials. While smaller in numbers, Gen X has quietly come of age. They are taking leadership roles in the business world, balancing it with parenthood and growing families, and in some cases even taking care of their aging parents. And while they are being pulled in many directions by life, like all of us, they are not getting any younger.
With all of those considerations in mind, Allianz Life recently took a closer look at Gen X (along with boomers and millennials) via its Generations Ahead study. While the data on boomers and millennials was interesting, it was the data on Gen X that was perhaps the most jarring. While one might think Gen X is well-positioned for the future given their life stage, from a retirement standpoint, the truth is that "reality still bites" for Gen X.
Taking a closer look at the findings, Gen X continues to struggle with debt and that is having a profound impact on their long-term planning, including retirement. Total non-mortgage (credit card and student loan) debt has increased 15 percent for Gen X since 2014. In turn, 50 percent of Gen Xers believe they can't start saving for retirement until they pay off their credit card debt.
However, Gen X does not seem to be losing much sleep over their financial issues. Despite growing debt, Gen Xers don't appear to be too worried about their future according to the study findings. Sixty-three percent of Gen Xers believe "everything will just work out" when it comes to retirement, up from 53 percent in 2014. And 53 percent of Gen Xers believe they'll just "figure it out" when they get to retirement, up from 46 percent in 2014.
However, there is a saying in the financial services industry that hope is not a financial strategy. With that in mind, here are some basic tips for Gen X to consider to help create a more solid financial reality for their future.
Get the budget in shape. Everyone needs to set aside money for an emergency fund, and that holds true for Gen X. Career and family are in full swing so the stakes are higher than they have been in the past. Also, while living paycheck-to-paycheck might be a current reality, kids going to college as well as retirement should not be neglected. While there is much debate about choosing college savings over retirement, it is a personal decision that must take into account several factors. (However, and generally speaking, there are many options for financial aid for college, but very few options if one has not saved enough upon reaching retirement.)
Also, assess the current debt situation. It is important to pay off debt, but it should not be the only priority that pushes aside all other financial plans and goals. Paying off debt needs to be addressed strategically and there are proven ways to tackle it. Pay off high interest loans first. Don't miss payments on other bills, but focus on eliminating those higher rate bills first. Also, if need be, think about consolidating the debt to attain an overall lower rate.
But don't make the mistake of neglecting to save for retirement and other longer-term financial goals by becoming overly preoccupied with eliminating debt. It is possible to tackle debt while remaining on track with other financial goals.
Protect against the unexpected. While youth might breed a feeling of invincibility, Gen X has reached the age where they know better. Ensuring a sufficient amount of life insurance is in place to provide security and protect against loss is critical. While it is never comfortable, thinking about how much money would be needed for one's family to carry on comfortably if the unexpected were to happen is something that needs to be done.
[See: A Beginner's Guide to Investing.]
In addition, disability insurance is also very important as Gen X is in the midst of its peak earning years.
Last, make sure beneficiaries are properly named, and a will is in place to ensure all of your assets including your investments are passed on accordingly. An attorney can help get the legal house in order so final wishes are fulfilled.
Act your investment age. Contrary to what some might think, Gen X does indeed have time to get back on track for saving for retirement, even if not much money has been put away as of yet.
First, utilize the full match offered by employers. Doing anything else is effectively leaving free money on the table. Second, while there is truth that investments should get more conservative as one gets older, it is not a one size fits all recommendation. Yes, keep some money in conservative investments for security, but remember that most members of Gen X are approximately 20 years away from retirement so taking a more aggressive position is not necessarily a bad thing.
A financial professional can help determine the best mix of investments based on the specifics of one's situation and their risk tolerance.
Take control. Instead of just hoping things will turn out OK, one way of taking greater control is working with a financial advisor to create a plan. While Gen Xers have been fiercely independent since childhood (they were the original latchkey kids), being open to getting financial advice is now more important than ever for Gen X.
According to the Generations Ahead study, only 39 percent of Gen Xers are working with a financial professional, but the same percentage of those without an advisor are open to receiving professional advice. Among the top issues Gen Xers want help with are planning and achieving a secure retirement, making sure they have enough money to last as long as they live and understanding the big picture of their money (spending, saving, and retirement).
Time is of the essence so don't wait. Friends and family are a good starting point for getting a recommendation of an advisor to consult.
Gen X has never had it easy and midlife is no exception. However, like they have at other times, they are in good position to rise to the occasion to create a positive future reality.
This material is intended for informational purposes only and is not intended to serve as the basis for any investment or purchasing decisions. Allianz does not provide tax or investment advice nor does Allianz provide financial planning services.
As vice president of Advanced Markets, Debra Repya oversees the development of advanced strategies and creative marketing programs that assist financial professionals in acquiring and serving clients with retirement planning, estate planning and other tax-related strategies. Prior to joining Allianz Life Insurance Company of North America (Allianz Life) in 2010, Repya was senior advanced strategies counsel for Securian Financial Services, providing tax and legal support to registered representatives working in advanced markets. Before that, she was the director of advanced marketing for Minnesota Life, a division of Securian Financial Group. Repya earned her bachelor's degree in English and German from Augustana College in South Dakota, and an master's of science in guidance counseling from the University of Nebraska-Omaha. She also earned her J.D. from Hamline University School of Law. Repya is a chartered life underwriter, chartered financial consultant, and is FINRA-registered with Series 7, 24, and 63 securities registrations.