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Posted by on Jun 11, 2014 in ETF Strategist

Is Generation X Really Up A Creek?

Is Generation X Really Up A Creek?

By Roger Nusbaum AdvisorShares ETF Strategist

Bloomberg dealt out some harsh reality in an article titled Lean Retirement Faces US Generation X as Wealth Trails. Generation X is of course the demographic group ranging from birthdays in the mid 1960’s to around 1980 (the article actually cites two different definitions for this group).

Essentially Gen X-ers have been unlucky multiple times because of the dot com blowup, the timing of the recovery from the dot com and then the housing crisis/great recession. The article contends that the timing of these events in relation to the age Gen X-ers were when they happened have hit the group harder than Baby Boomers, Generation Y or the Millennials.

There are so many moving parts to this that it is difficult to know where to begin. The article offers statistics to back up the assertion that Gen X-ers are the worst off but obviously many people are hurting.

When I posted the Bloomberg link on Facebook someone who is 32 commented on the extent to which he has struggled since 2007 with not having a job that he considers to be in his career track. I recently heard about a couple in their mid-late 40’s (so the front end of Generation X) facing serious trouble because of a balloon payment situation (how many of those are lurking out there?).

The big picture discussion of these things have been evolving on this site for many years. When the blog started in 2004 there were still people adversely affected from the tech wreck and now, per common sense and the Bloomberg article, there are people adversely affected by the great recession and will be adversely affected for many years to come—maybe forever?

The pursuit of digging out from under has many paths, none of which should be expected to be easy but this is a challenge to solve individually; people will have to craft their own solutions that they can live with.

Someone who is working in a job that could be reasonably defined as a career (even if not their full income potential) but with no meaningful savings needs to figure how to cut back now or cut back later—cutting back later would refer to cutting back on retirement by working longer.

Someone with no job has a bigger hill to climb of course. In a past post we dissected the numbers of a couple each working a total of 60 hours per week in two low paying jobs. This would be a difficult existence but that adds up to around $45,000 per year which in the context we’re talking about is pretty good. This scenario could allow for putting aside a little for retirement depending on location and willingness to live below ones means.

This scenario is unlikely to result in accumulating enough wealth for retirement but could result in accumulating a meaningful chunk especially for Gen X-ers with many years to go before getting to what is considered normal retirement age. A $300,000 nest egg would generate $1000/month (assumes a 4% annual withdrawal rate) which in the context of a $3000 monthly lifestyle seems like a decent chunk plus Social Security.

We’ve also written a couple of hundred posts about figuring a way to generate an income in retirement doing something you love. When my 80 year old neighbor with the backhoe (he is 83 now) and his wife were in their 50’s and he was newly retired from the police department they worked as caretakers on a wealthy celebrity’s compound in Florida for a few years before coming back to Arizona to take more backhoe hours at $60 per hour than they needed. The caretaking situation required some handyman skills and an ability to interact with very different types of people in return for a decent income and a free place to stay.

The solutions are endless and Gen X-ers who are struggling but fortunately they have the time to find the right answer for themselves.

There is also an implication for financial professionals (FP’s) in this. The industry might struggle if there is a gap between boomers and Gen Y that the X-ers do not fill. This could lead to a whole new series of discussions that FP’s will need to be ready to have in order to sustain their practices.