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It's the home stretch to retirement for members of Gen X—people born between 1965 and 1980. The oldest members of this generation are 59 years old. It's shocking to contemplate, but yes, the generation of MTV, Star Wars, E.T., Grease, and Rocky will be able to start drawing Social Security benefits in only 3 years!
Unfortunately, for various reasons, Gen Xers are generally poorly prepared for retirement. A whopping 40% have nothing at all saved but are living paycheck-to-paycheck and struggling to get out from under a mountain of debt. All is not lost, however. We've investigated the recommendations at Investopedia, Fidelity Investments, Forbes, Fortune, and others to pull together some workable ideas to help members of this generation survive and thrive in the many productive years they have ahead of them.
The Disappointments of Gen X
Gen X childhoods couldn't live up to the expectations of the ideal family life they saw on television . . . so they tried to create it themselves.
Gen Xers came of age at a time when television showed them perfect families like the Brady Bunch, the Waltons, the Keatons, and the Huxtables. Real life looked quite a bit different, though, as this was a generation of latchkey kids largely raising themselves in two-income or divorced homes. Gen Xers have often felt overlooked and betrayed by the discrepancy between their expectations and reality. This has made them quite cynical and suspicious of authority.
Quality of Life Over Quantity of Things
Members of Gen X tend to value having time to enjoy life more than the things they could purchase by working more.
One of the outworkings of these tendencies is that they often prioritize quality of life over income. They will turn down a better-paying job if it takes too much time away from their family life or free time pursuits that are important to them. They also tend to be less materialistic than other generations, often preferring to spend on experiences rather than material possessions. The priority Gen X has placed on a favorable work-life balance has cost them promotions and opportunities that younger and hungrier Millennials have snapped up.
The Advantages of Gen X
People born between 1965 and 1980 adapt easily to new technology but are not overly dependent on it.
Tech Skills
Gen X is the first computer generation. Personal computers came on the market in the late 1970s and early 1980s. Most members of this generation grew up without them but were exposed to the technology in their youth. They're comfortable adapting to new technology but are not dependent upon it. This also means they are skilled in written communication but still have strong social skills for in-person interaction.
Flexibility
This generation is also noted for its flexibility. They will loyally work for years in a job that meets their needs but are able to switch gears to a new employer or entirely new career field when it becomes necessary or advantageous to do so. They are creative, innovative, and entrepreneurial and enjoy working in environments with a laid-back, fun vibe. All of these qualities give Gen X some advantages in the new economy to thrive in start-ups and freelance online work.
How Comfortable Are Gen Xers With Their Finances?
Most members of Gen X are confident in their financial knowledge but more than half expect not to be able to afford to retire from work.
A 2022 study by Investopedia found that nearly 80% of Gen Xers believe they have a good understanding of debt, savings, insurance, and paying taxes. They tend to be somewhat less confident in their knowledge of retirement and investing. Retirement is by far the financial issue worrying Gen X the most right now. Only 55% of Gen Xers expect to be able to retire ; the rest expect to continue having to work well past retirement age.
What's Putting the Financial Squeeze on Gen X?
The Great Recession set back every American by about $70,000 in lifetime income.
According to 2023 data from Experian, Gen X carries an average household debt of $157,556—far more than any other generation. There are at least three reasons for this:
- They are at an expensive stage of life that all generations go through: still paying off their mortgages while sending kids to college and sometimes taking on expenses caring for aging parents or raising their grandchildren.
- Financially, Gen X was significantly set back by the Great Recession of 2007-2009. Some of them lost their jobs and homes and significant savings were wiped out. The U.S. Bureau of Labor Statistics has estimated that this crisis cost every individual American $70,000 in lifetime income.
- The career choices Gen X has made, such as moving from one employer to another, turning down promotions that would infringe on their lifestyle, or going into business for themselves, have left them with fewer pension funds or personal retirement savings.
What Can Gen X Do To Retire Well?
Gen X will need to retire consistently with the way they have lived: enjoying the simple things and not following the crowd.
Let's be frank. Barring an inheritance, winning the lottery, or making a once-in-a-lifetime investment that makes them millions overnight, most Gen-Xers are simply not going to retire in luxury. That doesn't mean they won't have a satisfying lifestyle in retirement—one that is consistent with the self-determined life they've built for themselves all along. Here are some suggestions:
1. Have Realistic Expectations
A modest home means fewer expenses. That's a win!
Many Gen Xers have lived their lives shunning the pursuit of materialism. Retirement is no time to shift gears and follow the herd. People of this generation can find greater financial peace if they set their sights on having the basics: food, clothing, shelter, and medical care. These are attainable at the most basic level, one way or another, for most people in the United States. But it might take living at a lower standard than we may have become accustomed to, or that our culture says is necessary.
So before you panic about your financial situation, ask yourself, truly, what are the basic essentials you must have in retirement? That list will not include vacations, newer cars, or golf memberships. Yeah, that stinks. But without those budget-busters, surviving in retirement won't seem like such an impossible goal. And you'll be able to find ways to enjoy life without pulling out your bank card every time you turn around.
2. Understand Your Budget
Figuring out how much money you have and where you're spending it is the first step in retirement planning.
Understanding your financial picture means, most fundamentally, knowing how much is coming in and how much is going out. So start logging everything in a spreadsheet or app for that purpose. Once you see what's happening with your money, you'll have a better grasp of where you can cut and whether you might need to look for additional income to meet essential expenses. As a general rule, financial planners suggest starting with the goal of living on 75-80%of your annual pre-retirement income. But no doubt some resourceful Gen Xers will be able to find ways to get by on less, depending on their circumstances and motivation.
3. Creatively Control Spending
Friends and neighbors can share their surplus with each other to make retirement more affordable.
Gen Xers are adaptable and think outside the box. Nearing retirement, it's time to apply that skillset to radically controlling spending. Some areas to consider:
- Downsize by selling everything you don't need. If you have more house or higher rent than you can afford, look for something else.
- Canceling video-streaming services, auto-renewing subscriptions, and app purchases.
- Use those internet skills to find cheaper ways to shop, including coupons, buying in bulk, and ordering online.
- Rock vintage clothes from second-hand stores rather than buying new. You'll even find name-brand clothes in up-scale neighborhoods.
- Make eating out a treat, not a regular thing. Even McDonald's will break the bank these days, as well as your waistline!
- Work with your community of friends and neighbors to share rides, maintenance projects, surplus food, housesitting, or other needs.
4. Find Ways to Increase Income
There are thousands of different online gigs, or you can create your own!
No doubt about it, many people of this generation will need to continue working well into their retirement years, perhaps as long as health and mental acuity permit. If you already have a career or profitable business that you can continue in after most people retire, you'll probably want to do that rather than risking everything on a new income stream. This is especially the case if your employer will match your retirement savings.
However, you can start one or more side gigs. And this is where your Gen X tech skills put you at an advantage over your parents. In an online environment, you don't have to reveal how old you are, so age discrimination is not as much of an issue. Working gigs on your computer gives you the opportunity to work from home on your own flexible schedule. You won't waste time and gas money on commuting or have to deal with annoying co-workers and office drama. Available gigs online include all sorts of things, from coding to being a virtual personal assistant to tutoring or English conversation practice to writing or even becoming a social media influencer. If you can't find something you like, start your own business. The sky's the limit!
5. Get a Grip on Debt
Credit cards are a major source of debt. Taming them is essential to your financial future.
After getting your budget balanced by reducing expenses and adding additional income, it's time to get a grip on debt. Here are some ideas:
- Emergency Fund: Before paying off debt, set aside $1,000 or more in an emergency fund. Going forward, this is what you will use in case of emergency rather than a credit card.
- New cards: You can roll your debts onto new credit cards with attractive introductory rates (sometimes 0% if paid off within 12-18 months). But remember, the debt must be paid in full by the end of the introductory period or you'll get back-charged the card's full normal interest rate from the time you got it. By all means, cancel every credit card once you pay it off.
- The Avalanche Method: Pay down the debts with the highest interest rates first, even if they are larger than some of your other debts. This is the most financially-sound way to do it, as it will save you more money in the long run if you stick to it in a disciplined way.
- The Snowball Method: Pay down the debts with the smallest balance first. This will be psychologically satisfying to you, as you'll see progress being made in eliminating debts. It will cost you more in the long run, but sometimes this is the method that keeps people most motivated to stick to their debt reduction plan.
6. Invest Strategically
Stocks are a reasonable investment for people nearing retirement, but need to be selected for their historic stability and regular returns.
Financial experts suggest putting your savings into an account that offers tax-advantaged growth, such as 401(k)s and 403(b)s. If your employer matches your contributions, then you need to put in the maximum they will match. In effect, this doubles your money. It's pretty hard to beat a 100% return on an investment! Individual retirement accounts, IRAs, and health savings accounts can also offer tax advantages.
As you're getting closer to retirement, it isn't prudent to take excessive risks with money you'll need relatively soon. This might mean avoiding flashy new tech stocks or weirdo cryptocurrencies, but it doesn't mean you have to limit yourself to bonds, either. Experts suggest, even at this stage of life, keeping a healthy portion of your retirement invested in blue-chip stocks and other moderate financial instruments that have proven historically to have great growth potential. You can accomplish this best by working with a financial planner to put your money into an appropriately-invested diversified mutual fund rather than picking stocks yourself.
7. Make Use of Social Services
Food banks are a great way to defray your grocery budget if you meet the income requirements.
If you're really struggling, don't be too proud to use whatever might legitimately be available to you through different governmental or private social service programs. You may qualify for discounts or free goods and services, food from food banks, car or home repairs provided by charitable organizations, service projects around your home by youth groups and volunteer organizations, or other community services. As a younger person, it's legitimate to try to pull your own weight and leave assistance programs for those who need them more. But you might be that person who needs this help due to age, health, mobility, or financial difficulty, so use them! Check online to learn about what is available in your area.
8. Create Your Own Definition of Success
If you get to spend time with the ones you love, that's a pretty successful life, isn't it?
It helps to stand back and look at our culture from a wider perspective. A consumer culture thrives when people feel dissatisfied with what they currently have, so much so that they will work to get money to change their circumstances. And we expect that after a lifetime of work, a successful person should have money set aside to take it easy in their retirement years. Nevermind the fact that you could pass away long before you ever really enjoy the fruits of your labor.
So, how will you define success? Will you compare with others or ask yourself, "Do I have what I actually need? Am I in contact with people I care about, who care about me? Am I able to experience gratitude and joy in the little things around me every day?" These things, rather than a bank account, are likely to be a more satisfying definition of success than the life plan culture offers.
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