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Squeeze play: Gen Xers especially feel the pinch

Insights Saving Retirement Plans

Saving for retirement can challenge the best of us. For one group of employees, the challenge seems particularly daunting. Your mid-career colleagues, those between 36 and 56 years of age, may sometimes feel the odds are stacked against them. They are squeezed by their own debt, financial obligations to children who are not yet grown, and often, financial demands of aging parents. How, they may wonder, will they ever be able to retire?

Here are a few statistics about this generation, according to information from an ADP Retirement report1:

  • More than 60% of Gen X workers have dependent children
  • 30% provide financial support to their parents or in-laws
  • 31% have outstanding student debt.

About one-third of Gen Xers answering the survey reported concern about their ability to meet current monthly expenses. In fact, in 2017 38% said they used a credit card to afford necessities, up a startling 11% compared to one year earlier.

Meanwhile, Gen Xers appear to be more confident in their ability to retire on time than in previous years. 29% reported in 2017 anxiety about not being able to do so, compared to 37% who felt that way in 2016. And three-quarters of Gen Xers are, indeed, saving for retirement, although about one-third have used their retirement assets for something unrelated to retirement, and nearly half believe they will need to at some point.

Retiree healthcare costs cause concern
A significant point of concern for Gen Xers is the cost of health care in retirement, with 30% citing it as a top concern. (Running out of money in retirement (46%) and health issues (32%) were the worries topping the list). They are right to be concerned. One national provider of healthcare cost-projection software expects a healthy 65-year-old couple retiring in 2018 to need nearly $364,000 in their retirement years to pay healthcare premiums and expenses.[2] Even so, only half of Gen X workers who have access to a Health Savings Account use it as a way to build a nest egg toward these expenses in retirement.

Push back with financial wellness education
To push back against the squeeze, many employers provide some form of financial wellness program. A solid financial wellness program should include education about managing debt, setting up and using a budget effectively, and finding ways to save for the future. Such a program can help solidify the relationship between employer and employees — for all ages and pay grades. It can help reduce financial stress on employees, which in turn may improve productivity — since, according to the survey, 34% of Gen Xers report being distracted at work over money. Among them, almost half say they spend at least 3 hours a week preoccupied with personal finance issues during the workday.

  1. Generation X: The Most Financially Stretched and Financially Stressed Generation, ADP Retirement Services 2018
  2. Healthview Services 2018 Retirement Healthcare Costs Data Report®, https://tinyurl.com/HVS-2018-retiree

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advisory services offered through LMC Financial Advisors a registered investment advisor. LMC Financial Advisors and LPL Financial are separate non-affiliated entities.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Content sourced from Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2019 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.