A recent study by Scottrade and BetterInvesting found that 43% of Gen Xers do not expect to ever be able to retire. In addition, 26% were unsure that they would be able to retire one day. Here’s what Chris X. Moloney, Scottrade’s chief marketing officer, had to say about the study:
“Gen X is in the middle of a ‘retirement perfect storm’ — very high expectations, low retirement savings and massive concern about the future of Social Security.”
Although everyone died on the boat (and I don’t expect such carnage here), I understand and agree with the implications of the reference to a perfect storm. But is this a generational thing? Let’s go one by one:
Higher Expectations
Do Gen Xers really have higher retirement expectations? Not the ones I talk to. Heck, the study itself indicates that two-thirds of Gen Xers are unsure they’ll ever be able to retire. Seems like pretty low expectations to me.
Low Retirement Savings
Once again, is this something that is specific to Gen X? I think not. In fact, I bet that in their 20s and 30s, Gen X has saved more of their own money for retirement than any previous generation. Of course, they have received far less from their employer (in the form of accruing pension benefits) than the generations before them did. But whose fault is that exactly? No Gen Xer I’ve ever met has opted out of a defined benefit pension to go buy a latte or been part of the executive committee voting to end the benefit for others.
Massive Concern About the Future of Social Security
Here’s my passionate agreement. You bet there’s massive concern about the future of Social Security! You could call it paranoia, but if there really were ants in my daughter’s bed, is it a bad dream or just really bad uncontrollable circumstances? Gen X, like the Boomers, continues to make huge involuntary payments every paycheck to today’s retirees. Yet few believe they’ll see much (if any) return from that money. Personally, I tell people to treat any Social Security benefits they may see during retirement as gravy. This stinks (I’d use a different word if this were a verbal conversation) because the enormous payroll tax (7.65% paid by you and 7.65% paid by your employer) makes it so much harder for each of us to save.
Maloney had another comment: “[Gen Xrs] are earning money and paying into Social Security and yet — they fear they may never see the payback. They feel they deserve it, but it looks like a financial black hole to them right now.”
I like the black hole analogy. But I’m glad we know about it now, when we can still do something about it.
What do you think? Black hole? Perfect storm? Are you getting ready or hoping it goes away?
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Perhaps by higher expectations, they mean that Gen X has higher expectations for post-retirement quality of life. All I know is I’m saving 16% (with a 4% match if I stick around long enough to vest) and I am hoping it’ll be enough. At a certain point that seems like the only option I have!
I’m a little puzzled why Gen-Xers don’t expect to reap social security benefits. Right now we’re pinched because we’re paying into a system for the boomers and we are a relatively small generation in numbers. However, the boomer’s children following us is very large. Aren’t they going to be the ones working and paying into the system when we retire?
@bethh – a great start – I agree, you’re taking advantage of the other thing you truly control in planning for retirement – how much you save.
@jw – you’re certainly correct in that our generation is smaller than the one that follows. But we’re not pinched because the boomers are so large – they just started retiring last year and the rate hasn’t increased for many years (the cap does, but that’s only by inflation). My point is simply that some combination of further benefit cuts and tax increases are likely and I don’t expect we’ll see even the lousy return on our “investment” in the system that our boomer parents will. Treat Social Security like it is gravy and you’ll be okay. Rely on it at your own peril.
I am a Gen-X person. With all of the financial institutions, corporate businesses and other greedy parasites begging for more bailout money from Uncle Sam and the national debt reaching into the billions, I may never see my retirement money. I’ll end up paying their debts, my student loan debt and more debts. The only solution to the debt problem is to become wealthy like Oprah Winfrey, The Hiltons, The Olsen Twins and other mega rich people and secure my money into a Roth or IRA account.