Four Financial Fixes That Gen X Need to Consider

It’s not always easy to tell when Gen X are in trouble. We were the generation raised to sort out our own problems, or brush them under the rug. On the whole we’re stoic, cynical, and have a tendency to pride ourselves on not starting or fueling drama. So it’s not surprising that many of us are quietly drowning, financially speaking.

Born between 1965 and 1980, Gen X are now in later midlife, often juggling mortgages, other debts, and kids’ ever-rising college costs, while trying to save for retirement too, which is perhaps why The Economist suggests that Gen X is the real loser generation.

It doesn’t help that many of us are now cutting back on work to provide care to ageing parents. To top it off Gen X were the ones who raised Gen Z, known for often relying on the Bank of Mom and Dad. And — perhaps as a backlash to their own haphazard and somewhat feral childhood and adolescence — Gen X as a group seem to want to support their kids as much as they possibly can.

So if you’re Gen X and quietly drowning, it’s time to look at some fixes and see if things can be improved. Here are a few things to consider.

Address Retirement Planning

While there are no doubt plenty of exceptions, Gen X as a whole hasn’t saved enough for retirement. Addressing that should probably be priority number one for most, and it may mean making some hard decisions, like putting retirement savings ahead of paying for college education.

Before you have a meltdown at the thought of it, talk to your kids, if they’re not yet college age. Many young adults are reacting to the extreme levels of student debt they see others dealing with, and opting for more practical community college courses or other options. They may even be happy to have some pressure taken off.

Then it’s time to really assess all your retirement savings — and goals — and put a plan in place. You may have more options than you think, especially if you’re hurtling towards an empty nest with lots of equity in your home. Downsizing is an obvious option, as is renting out part of your property, or all of it if you want to relocate in retirement, perhaps somewhere to somewhere with a lower cost of living.

Kerry Hannon, coauthor of the book Retirement Bites: A Gen X Guide to Securing Your Financial Future stresses that Gen X still have options when it comes to retirement. Speaking in an interview with Kiplinger, she points out:

As they become empty nesters, Gen Xers will have more opportunity to become super savers and take advantage of things like the catch-up contributions that people 50 and older can make to their retirement accounts.

So you have options. Just act on them now rather than later.

Deal with That Debt

I often give people the advice that they need to “deal with debt”, because it’s not always helpful to say “eliminate debt” or simply “pay debt off”. Gen X now carry some of the highest and most crushing debt, compared to other age groups, and that can’t be paid off quickly and easily.

Dealing with debt simply means assessing exactly what you owe and making a plan to pay it down. That alone makes many people feel much more in control of their finances, and is always worth doing.

Most of Gen X still have a mortgage, but they also carry a lot of high-interest credit card debt, which should be a first priority. Paying down high-interest debt puts you back in charge of your income. It’s worth considering consolidation loans, re-financing packages, and moving credit and charge card debt on to 0% cards, with a plan to pay them off before any more interest kicks in.

More drastic measures are worth considering too. Like the property downsizing mentioned above. For some it may be the only way they’ll fully clear their mortgage, especially if they’ve re-financed multiple times. As always, it’s worth talking to a professional (or several) at this point. Perhaps a credit counsellor to really make the best plan to repay current debts, and a retirement planner for other options you might have missed.

Be Realistic About Inheritance

Gen Xers do have one potential advantage. They’re often the kids of older generations who lived through simpler (and much more affordable) times. Their parents bought homes when they came at a very reasonable cost, and existed in a stable job market where re-financing wasn’t as needed as it often is now.

According to a report from Wealth-X an upcoming generational wealth Transfer will see 1.2 million individuals worth $5 million or more passing on a total of over $31 trillion to their inheritors, by 2033.

While this will only apply to the minority, there are plenty of ordinary middle-class families handing over houses they once bought for five-figure sums and are now worth closer to seven figures. And some of Gen X are relying on that inheritance for their retirement savings.

That’s all fine, but life is unpredictable. Not all parents are going to be able or willing to hand that money to their kids. Elder care is hugely expensive, and many have no real plan for it other than to use their current capital (including home equity). Meaning your parents care in their old age can wipe out the inheritance you were expecting.

Depending on where in the world you live, taxes can also take a chunk, and big families will be splitting that windfall many ways. Inheritance, for most, is probably best looked at as a bonus, not a retirement plan.

Accept Your Own Mortality

A report from Western & Southern Financial Group found that around half of American adults don’t have any kind of life insurance, and about a quarter of those only have a group life policy from their employer which, depending on their circumstances, may not be adequate for their needs. The numbers of Gen Xers with some kind of life cover in place stands at around 55%.

No-one wants to address the worst case scenario, but it’s worth looking into whether life insurance is a good investment for you and your family. While you’re at it, now is as good a time as any to create or review your entire estate plan. That includes drafting or updating your will, getting Power of Attorney in place, and updating beneficiaries on things like insurance policies and pension pots.

Don’t forget to consider digital estate planning too. And ensure that paperwork is in order so beneficiaries can actually find it and act on it. Putting your affairs in order makes you feel better and saves a lot of unnecessary stress for your family, should the worst happen.

About the Author

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen