Financially speaking, Generation X has been thoroughly shafted. While Millennials may face a greater number of economic hardships, Generation X is further along the path to retirement age, and is quickly losing a critical ally in their attempt to prepare themselves financially; time. Gen X’ers hold the dubious distinction of owing more median debt than Millennials, Boomers, or the Silent Generation in terms of car loan debt ($14,000), credit card debt ($5,000), mortgage debt ($129,000) and overall debt ($103,000). The problem for Generation X, is that, unlike many Boomers, they will not enjoy a conventional retirement and they will never receive Social Security, nor do they expect to.
An interview in the Star Tribune with Katie Libbe, VP of consumer insights for Allianz Life, discusses Generation X’ers precarious financial position, how they are coming to grips with it, and some of the options that they have remaining. Here are some key segments from the interview
Q: Generation X, generally those born between 1965 and 1980, were hit harder by the recession than any other age group. How has that shaped their view of retirement planning?
A: If you compare the three generations, the Gen Xers feel like they got the short straw. Baby boomers had pensions; they’ll get Social Security. And millennials have time on their side. Gen Xers racked up college debt, and they maybe bought their house at the top of bubble before the bubble burst. Our research had a lot of data on the “post-crash” mindset. Generation Xers were very skeptical that things could really turn out for them. A big theme was about debt and what to do about it: I can’t save because I’ve got all this debt.
Q: How big of a factor is college debt in preventing Generation X from seeing beyond the next few years?
A: It’s a big factor. A lot of Gen Xers were encouraged to get that degree no matter how much it cost. It’s unfortunate, because it has become almost impossible to pay for college without taking out student loans. And then you’re strapped when you get out of college. You need a level of work that’s going to allow you to pay for a $1,000-a-month student loan, which can be a tall order. Generation X is the first generation that’s had to deal with that.
As bad as this is for Gen X, the trend is far worse for Millennials, as most schools still push the “Tassle is Worth the Hassle” narrative, while failing to educate young Americans about the financial implications of taking on a large amount of student loan debt.
Q: Your report says Gen Xers have their head in the sand when it comes to retirement. What does that mean?
A: They’re taking a pragmatic and realistic look at a traditional retirement — where one day you stop working completely and it’s all leisure — and they’re saying: That’s not going to happen. They know they need to build some financial security. And yet two-thirds of them, about 64 percent, look at the uncertainty and the difficulty of trying to estimate what they’re going to need that far out and don’t take any action at all. This “head in the sand” notion is about recognizing that they should be building financial security but on the other hand not doing anything about it. The Gen Xers think: I’ve always landed on my feet. I’ll figure it out when I’m closer to retirement.
Q: So there’s a false sense of confidence along with a deep sense of hopelessness?
A: Definitely. In one focus group, we were talking about saving for retirement. They were overwhelmed by uncertainty. How do I know what my expenses are going to be 20 years from now? Someone said, “I needed to have $1 million when I retire. That’s never going to happen.” Someone else, who was 35, said, “Yeah, you will. A million is doable when you have 30 years.” A million dollars sounds like a lot, and it is. But if you save $100 every month and you bump it up over time, you could be there. I really got the sense that if you put a compound interest calculator in front of somebody and showed them what would happen if they took a hiatus from spending on the credit card, paid down that debt and started saving, they’d be amazed at what they’d have in 20 years.
I have a simple solution for Generation X. Demand the choice to opt-out of Social Security. Consider that the median family income for them is $71,000. If a family earning that amount were no longer forced to pay into Social Security and decided to opt-out, they would receive back their forced payroll contribution of 6.2%. This would result in savings of $4,402 a year, or $368 a month. That could help considerably with saving toward retirement and/or paring down debt, especially to those who have two decades or more until age 65.
Libbe covers more points in the full interview but fails to discuss the fact that Generation X will not receive their money back from Social Security. Generation X, like Millennials, should be mad as hell about facing their retirement years without the guarantees of Social Security income that the Silent Generation and most Boomers will enjoy. The time for “expanding” Social Security has long passed, the time has come for everyone under the age of 50 to demand the right to take control of their retirement and opt-out.
-R.J. Renza, Jr.
While you’re here, take a moment and sign the National Petition to Opt-Out of Social Security. The more signatures we gather, the more pressure we place on Congress and our political leaders.
August marked the release of my first e-book “How Are You Not Angry Yet: How Social Security is Destroying the Futures, Finances and Hopes of Generations X,Y and Z and How We Can Put and End to it.” “Angry Yet” breaks down the complex topic of Social Security into a way that most Americans can easily understand and find entertaining and is available on Amazon right here.