Lessons from Gen X: How to Ditch the Gloom and Plan for a Brighter Future
February 1, 2016 | Your Finances
By Lisa Wirthman
The members of Generation X are the country’s unhappy middle children. Stuck between Boomers and Millennials, these adults between ages 35 and 49 are in the worst financial shape of any generation, reports the 2015 Northwestern Mutual Planning & Progress Study.
Gen Xers are tallying up the most debt and are the most pessimistic about being able to afford to retire, the study reports. They were also the hardest hit by the recession and lost nearly half of their wealth, according to a 2013 Pew Charitable Trusts survey.
Here’s the good news: It’s not too late for members of Gen X to ditch the doom and gloom and plan for a brighter future by tackling their challenges head-on, getting a clear picture of their current savings and seeking realistic solutions for their financial needs in retirement.
Why So Pessimistic?
It’s not easy being X, according to Rebekah Barsch, vice president of planning and sales for Northwestern Mutual. Gen Xers are losing confidence about whether Social Security will be a meaningful part of their retirement income, and they’re realizing they won’t have the pensions that funded their parents’ retirement, she said.
Generation X also makes up a significant portion of the “sandwich generation,” who are caring for both children under 18 and aging parents, which adds financial pressure, reports the Northwestern Mutual study.
Nearly 4 in 10 Gen Xers say they don’t feel financially secure, according to the Northwestern Mutual study, and two-thirds expect that they’ll have to delay retirement because of insufficient savings. Even gloomier, about 2 in 10 Gen Xers believe they will never retire.
Hope for the Future
Fortunately, there’s still time for Gen Xers to change their trajectory, said Barsch.
“We have seen people who have done an amazing job of not only putting more money away, but really right-sizing their current lifestyle,” she said. “Even within 10 years of retirement, you can still make a significant positive impact.”
Here are six tips to help Gen Xers take control of their finances—and their futures:
1. Look ahead. Gen Xers are not blind to their financial condition: Two-thirds acknowledge the need for better financial planning, according to the Northwestern Mutual report. But almost half of those surveyed have never discussed retirement planning with anyone. Many Gen Xers also prioritize current financial pressures over future needs, said Barsch.
“There’s this much more urgent feeling about managing debt than there is about saving for the future,” she said. “In that trade-off, retirement savings can sometimes get kicked down the road.”
“Like many problems, if we ignore them, they compound themselves,” she said. “Starting today is better than starting tomorrow, particularly when tomorrow never comes.”
3. Make trade-offs. Seeking the advice of a financial professional who can suggest savings options tailored to their personal situations is a great place for Gen Xers to start, Barsch said.
Another tip is for Gen Xers to make conscious trade-offs about the amount of money that they’re saving versus spending. One way to do this is to test themselves to see if they can increase contributions to workplace retirement savings programs without sacrificing their quality of life, she added. For example, commit to an increase in savings as the first priority every time your income rises.
4. Know where you stand. Gen Xers need to get a clear picture of what their current rate of savings will produce as income in retirement.
“Some people have a fear of knowing exactly where they stand related to retirement,” Barsch said, “but it’s much better to know and to know as early as possible so that you are following a clear path.”
The upside to facing financial realities is that many Gen Xers are entering their peak earning years. In addition, many retirement vehicles like IRA plans offer catch-up options that allow individuals to contribute greater amounts of money as they get closer to retirement age.
5. Don’t sacrifice retirement for college. Many Gen Xers are trying to choose between saving for their children’s college expenses and saving for retirement. But it’s OK to focus on your own future. In fact, your children will likely thank you for doing so.
“Many of our clients will say to us that their number-one goal is their kids’ education,” added Barsch. “It raises the question: Do you want to give that support to your son or daughter now, even if that means you’re going to be dependent on them later?”
There are no loans for retirement, said Barsch, but loans are available for college. Gen Xers have different options on how to fund each goal and should consider all possibilities before robbing retirement savings to pay for college.
6. Stay positive. Above all, Gen Xers need to understand there are plenty of reasons for optimism.
“Take the first step,” said Barsch. “Sometimes pessimism comes from a lack of action or a lack of understanding."
“If you can understand your situation realistically,” she added, “you can be taking steps to make sure you have the kind of retirement you want.”
Lisa Wirthman writes about business, sustainability, public policy and women’s issues. Her work has been published in TheAtlantic.com, USA Today, U.S. News & World Report, Fast Company, Investor’s Business Daily, the Denver Post and the Denver Business Journal.
Originally published on Northwestern MutualVoice on Forbes.com.