9 ms·

GenX Are a Retirement Time Bomb for the American Economy

62 points by TechFinder 7y ago

dv_dt 7y ago
Are those stats really that different from those at or near retirement in the boomer generation? They're also likely better (in the weakest sense possible) than the projected retirements for Millenials forward.
- rconti 7y ago
  Hard to say. We keep hearing that millennials can't afford to buy a house or have kids; OTOH savings rates went way up after the 2008 recession and have continued to fare surprisingly well.
sevensor 7y ago
I wonder if this in any sense reflects the Gen-X cynicism I associate with the 1990s, the expectation that the system that bore up their parents would crumble before their turn came. Had perhaps already crumbled. Were they right? Is this self-fulfilling prophecy?
- 98codes 7y ago
  The news about the Social Security fund being insolvent right around when gen X was due to hit eligibility has quieted down in the last decade. I figure it's mostly because the media has largely forgotten gen X exists, instead focusing on the boomers and echo boomers, the millenials.
  - cimmanom 7y ago
    But social security is solvent and is projected to be so for a while. It’s Medicare that isn’t.
    - joezydeco 7y ago
      Social Security is projected to be insolvent in 2035, exactly when Gen X begins to hit retirement age: https://www.cnbc.com/2019/04/22/social-security-is-headed-for-insolvency-by-2035-government-says.html https://www.cnbc.com/2019/04/22/social-security-is-headed-fo...
    - 98codes 7y ago
      checks math Ok, so maybe it'll be ok for two years.
- jvreagan 7y ago
  As a Gen-Xer, I think that cynicism had its roots in both the 80s and 90s with the number of companies that left our parents out to dry with disappearing pensions and people doing the math to realize that Social Security was unsustainable and would be gone by the time we retire. And somehow our generation was expected to support all of society including the generation behind us. I would postulate the opposite - I would have thought because we believe that neither companies nor the guvmint would be there to support us, we would have fended for ourselves better (I know that's how I personally took it, and many/most of my friends). But you might be right... sounds like an attitude of "ef it, we're doomed" set in.
  - toomuchtodo 7y ago
    Social Security will not be gone, and it is not unsustainable at a macro level. Currently configured, it will pay out ~75% of earned benefits once the trust fund is exhausted in 2034. Several small changes, in concert, remove any insolvency concerns. It keeps 22 million Americans out of poverty [1], and is very efficient in terms of admin costs vs distributed benefits. I posit it's cheaper to keep those benefits recipients out of poverty, versus paying for what happens if they aren't kept out of poverty. Healthcare? Universal healthcare (Medicare For All), allowing for shedding the current jigsaw of healthcare benefits across the country. Less admin overhead, more care providers. If you're a pension that committed to healthcare expenses (state & local government, and manufacturers), you should be ringing the Medicare For All bell the hardest, to get the necessary infrastructure in place before your shortfalls arrive. > I would postulate the opposite - I would have thought because we believe that neither companies nor the guvmint would be there to support us, we would have fended for ourselves better (I know that's how I personally took it, and many/most of my friends). But you might be right... sounds like an attitude of "ef it, we're doomed" set in. Most Americans don't have the discretionary income after mandatory expenses to save to "fend for themselves" due to forty years of wage stagnation. This is why so many must rely on government programs to survive. [2] [1] https://www.cbpp.org/research/social-security/social-security-lifts-more-americans-above-poverty-than-any-other-program https://www.cbpp.org/research/social-security/social-securit... (Social Security Lifts More Americans Above Poverty Than Any Other Program) [2] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... (For most U.S. workers, real wages have barely budged in decades)
rconti 7y ago
"U.S. households with any kind of debt — mortgage, credit cards, student loans, auto loans, etc. — owe an average $135,768" So, if we exclude everyone who has no debt, and include mortgage debt as 'debt', Gen X has a scary-sounding level of debt! Whodathunkit? I started a new job last year, and it's pretty scary to login and look at my 401k, where it says: "People My Age: Average Savings Rate: 6%. Account Balance: $29,428". Now, presumably, some/many of their account holders ALSO have other retirement accounts, but I imagine the average age of these accounts is probably more than the 1 year I have into it.
- eej71 7y ago
  Would probably be more useful to know the relative size of the mortgage that remains to be paid compared to prior generations at the same age. Or even - the average amount of debt relative to the holder's average annual income and compare that against prior generations at that age.
pmiller2 7y ago
I’m wondering how these two statements comport: > Just over half (53%) of Gen Xers report having three months worth of salary socked away — money that could be used as an emergency fund. What’s more, 48% of Gen Xers said they’re living paycheck to paycheck Since 48 + 53 > 100, either there is a rounding error or there are people who have 3 months’ savings who are also living paycheck to paycheck. I don’t see how it’s possible to be living paycheck to paycheck and have significant savings, unless this implies a sudden and relatively recent change in circumstances. It would be interesting to see if there is more detail on this in the linked MetLife study (which I haven’t got time to read right now, unfortunately).
- Pfhreak 7y ago
  Could be they've earmarked the savings earlier. Or had a windfall, or they include putting aside 1% of their income to savings as still living paycheck to paycheck. It can definitely be the case that someone's income is being entirely spent each paycheck and that they have some savings.
- jchrisa 7y ago
  If your regular pay just barely makes ends meet, but you've had a couple of windfalls and exercised financial discipline with the results. You aren't able to save, but you aren't broke.
- irrational 7y ago
  Is the 3 months of salary socked away somewhere it is accessible? I have hundreds of thousands of dollars in 401k, but I live paycheck to paycheck and have no readily accessible savings.
  - refurb 7y ago
    Why did you do that? You should be funding an emergency savings account before funding your 401k. Why? To avoid the situation you’re in - no easy access to savings.
    - 7y ago
dragonwriter 7y ago
> Almost half of Gen X respondents, defined as ages 38 to 53, said they have no money saved in a retirement account. > Curiously, the Gen Xers were the least likely generation to say they would save or invest an extra $1,000, instead using it to pay outstanding bills and debt. How is this “curiously”? The fact that GenX has high debt balances is why their marginal income is more likely to go to paying (high-interest) debt rather than going into (low-yield) retirement savings, which is also why they don't have retirement savings since their money has instead been going to debt repayment.
- ThrustVectoring 7y ago
  Both indebtedness and the low yield of retirement savings are related - they're the macroeconomic effects necessary for current workers to consume a smaller share of their current productivity, leaving a larger share behind for non-workers.
- ac29 7y ago
  > (low-yield) retirement savings Not sure about that. The last 20 years (most of Gen Xers working lives), returns in the stock market have been reasonably good, despite there having been multiple recessionary periods. Jan 2000-April 2019 S&P500: 5.688% annualized (190.085% for the period) https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/
  - dragonwriter 7y ago
    Low yield compared to paying off debt. Reasonably good stock market yields are still well below lots of the debts people have; 5.688% isn't much more than interest on a lot of federally subsidized student loans, and far less than on lots of consumer debt.
  - dv_dt 7y ago
    You say that's good performance, but the rule of thumb for the baby boomer generation was to assume a 10% annualized return from the market. In fact, many pensions are in trouble from assuming 10% while there was actually a gap.
neogodless 7y ago
The only comparison made in the article between Gen X and other generations was the subjective statement of being spoiled by their parents. If this article meant to be useful, it would compare other statements, like how many of the previous generation had funded retirement accounts at this age. Instead, it's doom and gloom scare tactics but I feel it lacks substantial information to provide value.
cimmanom 7y ago
Paywalled. :(
- _eht 7y ago
  How else do you expect journalists to retire?
  - mt3ck 7y ago
    Ads give me ads!
ThrustVectoring 7y ago
It's important to keep in mind that current workers always are the ones supporting current retirees. It doesn't matter if it's through taxes in a pay-as-you-go system like Social Security, or through the various investments a fully funded account would own. At the net macroeconomic level, workers make stuff and a portion of that gets redirected to taxes, debt repayment, and return-on-capital that non-workers then consume. In other words, GenX getting squeezed by debt payments and cost-of-living etc isn't something that comes ex nihilo. It's deeply related to the demographic situation - large number of long-lived Baby Boomers compared to the demographic makeup of prior generations.
- cimmanom 7y ago
  And to keep social security solvent for GenX would require squeezing Millennials even harder by increasing the taxes or reducing payouts or both.
  - british_india 7y ago
    Or the entire system can be fixed by removing the social security withholding cap, currently at $137k. Remove that for all income and the problem is solved.
  - ThrustVectoring 7y ago
    Reducing future payouts doesn't make Millennials worse off today from an analysis of the flows of real goods and services. At most, it means they need to save more to maintain the same expected standard of living at retirement, which ends up bidding up asset prices and thus indirectly subsidizing retirees currently selling assets.
  - pmoriarty 7y ago
    Or, you know, the US could refrain from starting three trillion dollar wars, and cut the bloated military budget.
    - ThrustVectoring 7y ago
JohnFen 7y ago
I'm a little older than Gen X, but I share many of the same concerns. When the economy crashed, I saw many people I know who had done everything right in terms of retirement savings get wiped out just as they were retiring. They were ruined. It's awfully hard to have any sort of trust in a system that allows this to happen.
- whamlastxmas 7y ago
  If you're near retirement and your investments are so volatile as to be "wiped out" and "ruined" by a short term economic downturn then they are absolutely not doing everything right. In fact it's pretty much the opposite.
  - JohnFen 7y ago
    Well, I was not privy to their entire approach, so you could be right. However, they thought they were doing it right. Nonetheless, it did, and does, give me pause.
    - pickle-wizard 7y ago
      You bring up a good point. When it comes to investing, most people don't have a clue what they are doing. This in my opinion is the biggest problem with the move from a defined benefit to a defined contribution retirement scheme. It took the investing out of the hands of the people that knew what they were doing. Along those lines it really grinds my gears how the financial industry is ripping off people who are saving for retirement. Most 401k plans I've seen have incredibly high fees with a few investments that charge equally as high of fee. Especially those at small companies.
      - JohnFen 7y ago
        > When it comes to investing, most people don't have a clue what they are doing. This is why I largely avoid investing (I do have some money in index funds, though). I know that I don't know what I'm doing in that world, and I also lack the time or interest required to become competent in it.
weaklearner 7y ago
frankly I am quite skeptical of the macro-economic predictions of a 'blockchain mark consultant'

62 points by TechFinder 7y ago

Are those stats really that different from those at or near retirement in the boomer generation? They're also likely better (in the weakest sense possible) than the projected retirements for Millenials forward.

rconti 7y ago
Hard to say. We keep hearing that millennials can't afford to buy a house or have kids; OTOH savings rates went way up after the 2008 recession and have continued to fare surprisingly well.

sevensor 7y ago

I wonder if this in any sense reflects the Gen-X cynicism I associate with the 1990s, the expectation that the system that bore up their parents would crumble before their turn came. Had perhaps already crumbled. Were they right? Is this self-fulfilling prophecy?

98codes 7y ago
The news about the Social Security fund being insolvent right around when gen X was due to hit eligibility has quieted down in the last decade. I figure it's mostly because the media has largely forgotten gen X exists, instead focusing on the boomers and echo boomers, the millenials.
- cimmanom 7y ago
  But social security is solvent and is projected to be so for a while. It’s Medicare that isn’t.
  - joezydeco 7y ago
    Social Security is projected to be insolvent in 2035, exactly when Gen X begins to hit retirement age: https://www.cnbc.com/2019/04/22/social-security-is-headed-for-insolvency-by-2035-government-says.html https://www.cnbc.com/2019/04/22/social-security-is-headed-fo...
  - 98codes 7y ago
    checks math Ok, so maybe it'll be ok for two years.
jvreagan 7y ago
As a Gen-Xer, I think that cynicism had its roots in both the 80s and 90s with the number of companies that left our parents out to dry with disappearing pensions and people doing the math to realize that Social Security was unsustainable and would be gone by the time we retire. And somehow our generation was expected to support all of society including the generation behind us. I would postulate the opposite - I would have thought because we believe that neither companies nor the guvmint would be there to support us, we would have fended for ourselves better (I know that's how I personally took it, and many/most of my friends). But you might be right... sounds like an attitude of "ef it, we're doomed" set in.
- toomuchtodo 7y ago
  Social Security will not be gone, and it is not unsustainable at a macro level. Currently configured, it will pay out ~75% of earned benefits once the trust fund is exhausted in 2034. Several small changes, in concert, remove any insolvency concerns. It keeps 22 million Americans out of poverty [1], and is very efficient in terms of admin costs vs distributed benefits. I posit it's cheaper to keep those benefits recipients out of poverty, versus paying for what happens if they aren't kept out of poverty. Healthcare? Universal healthcare (Medicare For All), allowing for shedding the current jigsaw of healthcare benefits across the country. Less admin overhead, more care providers. If you're a pension that committed to healthcare expenses (state & local government, and manufacturers), you should be ringing the Medicare For All bell the hardest, to get the necessary infrastructure in place before your shortfalls arrive. > I would postulate the opposite - I would have thought because we believe that neither companies nor the guvmint would be there to support us, we would have fended for ourselves better (I know that's how I personally took it, and many/most of my friends). But you might be right... sounds like an attitude of "ef it, we're doomed" set in. Most Americans don't have the discretionary income after mandatory expenses to save to "fend for themselves" due to forty years of wage stagnation. This is why so many must rely on government programs to survive. [2] [1] https://www.cbpp.org/research/social-security/social-security-lifts-more-americans-above-poverty-than-any-other-program https://www.cbpp.org/research/social-security/social-securit... (Social Security Lifts More Americans Above Poverty Than Any Other Program) [2] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... (For most U.S. workers, real wages have barely budged in decades)

rconti 7y ago

"U.S. households with any kind of debt — mortgage, credit cards, student loans, auto loans, etc. — owe an average $135,768" So, if we exclude everyone who has no debt, and include mortgage debt as 'debt', Gen X has a scary-sounding level of debt! Whodathunkit? I started a new job last year, and it's pretty scary to login and look at my 401k, where it says: "People My Age: Average Savings Rate: 6%. Account Balance: $29,428". Now, presumably, some/many of their account holders ALSO have other retirement accounts, but I imagine the average age of these accounts is probably more than the 1 year I have into it.

eej71 7y ago
Would probably be more useful to know the relative size of the mortgage that remains to be paid compared to prior generations at the same age. Or even - the average amount of debt relative to the holder's average annual income and compare that against prior generations at that age.

pmiller2 7y ago

I’m wondering how these two statements comport: > Just over half (53%) of Gen Xers report having three months worth of salary socked away — money that could be used as an emergency fund. What’s more, 48% of Gen Xers said they’re living paycheck to paycheck Since 48 + 53 > 100, either there is a rounding error or there are people who have 3 months’ savings who are also living paycheck to paycheck. I don’t see how it’s possible to be living paycheck to paycheck and have significant savings, unless this implies a sudden and relatively recent change in circumstances. It would be interesting to see if there is more detail on this in the linked MetLife study (which I haven’t got time to read right now, unfortunately).

Pfhreak 7y ago
Could be they've earmarked the savings earlier. Or had a windfall, or they include putting aside 1% of their income to savings as still living paycheck to paycheck. It can definitely be the case that someone's income is being entirely spent each paycheck and that they have some savings.
jchrisa 7y ago
If your regular pay just barely makes ends meet, but you've had a couple of windfalls and exercised financial discipline with the results. You aren't able to save, but you aren't broke.
irrational 7y ago
Is the 3 months of salary socked away somewhere it is accessible? I have hundreds of thousands of dollars in 401k, but I live paycheck to paycheck and have no readily accessible savings.
- refurb 7y ago
  Why did you do that? You should be funding an emergency savings account before funding your 401k. Why? To avoid the situation you’re in - no easy access to savings.
  - 7y ago

dragonwriter 7y ago

> Almost half of Gen X respondents, defined as ages 38 to 53, said they have no money saved in a retirement account. > Curiously, the Gen Xers were the least likely generation to say they would save or invest an extra $1,000, instead using it to pay outstanding bills and debt. How is this “curiously”? The fact that GenX has high debt balances is why their marginal income is more likely to go to paying (high-interest) debt rather than going into (low-yield) retirement savings, which is also why they don't have retirement savings since their money has instead been going to debt repayment.

ThrustVectoring 7y ago
Both indebtedness and the low yield of retirement savings are related - they're the macroeconomic effects necessary for current workers to consume a smaller share of their current productivity, leaving a larger share behind for non-workers.
ac29 7y ago
> (low-yield) retirement savings Not sure about that. The last 20 years (most of Gen Xers working lives), returns in the stock market have been reasonably good, despite there having been multiple recessionary periods. Jan 2000-April 2019 S&P500: 5.688% annualized (190.085% for the period) https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/
- dragonwriter 7y ago
  Low yield compared to paying off debt. Reasonably good stock market yields are still well below lots of the debts people have; 5.688% isn't much more than interest on a lot of federally subsidized student loans, and far less than on lots of consumer debt.
- dv_dt 7y ago
  You say that's good performance, but the rule of thumb for the baby boomer generation was to assume a 10% annualized return from the market. In fact, many pensions are in trouble from assuming 10% while there was actually a gap.

neogodless 7y ago

The only comparison made in the article between Gen X and other generations was the subjective statement of being spoiled by their parents. If this article meant to be useful, it would compare other statements, like how many of the previous generation had funded retirement accounts at this age. Instead, it's doom and gloom scare tactics but I feel it lacks substantial information to provide value.

cimmanom 7y ago

Paywalled. :(

_eht 7y ago
How else do you expect journalists to retire?
- mt3ck 7y ago
  Ads give me ads!

ThrustVectoring 7y ago

It's important to keep in mind that current workers always are the ones supporting current retirees. It doesn't matter if it's through taxes in a pay-as-you-go system like Social Security, or through the various investments a fully funded account would own. At the net macroeconomic level, workers make stuff and a portion of that gets redirected to taxes, debt repayment, and return-on-capital that non-workers then consume. In other words, GenX getting squeezed by debt payments and cost-of-living etc isn't something that comes ex nihilo. It's deeply related to the demographic situation - large number of long-lived Baby Boomers compared to the demographic makeup of prior generations.

cimmanom 7y ago
And to keep social security solvent for GenX would require squeezing Millennials even harder by increasing the taxes or reducing payouts or both.
- british_india 7y ago
  Or the entire system can be fixed by removing the social security withholding cap, currently at $137k. Remove that for all income and the problem is solved.
- ThrustVectoring 7y ago
  Reducing future payouts doesn't make Millennials worse off today from an analysis of the flows of real goods and services. At most, it means they need to save more to maintain the same expected standard of living at retirement, which ends up bidding up asset prices and thus indirectly subsidizing retirees currently selling assets.
- pmoriarty 7y ago
  Or, you know, the US could refrain from starting three trillion dollar wars, and cut the bloated military budget.
  - ThrustVectoring 7y ago

JohnFen 7y ago

I'm a little older than Gen X, but I share many of the same concerns. When the economy crashed, I saw many people I know who had done everything right in terms of retirement savings get wiped out just as they were retiring. They were ruined. It's awfully hard to have any sort of trust in a system that allows this to happen.

whamlastxmas 7y ago
If you're near retirement and your investments are so volatile as to be "wiped out" and "ruined" by a short term economic downturn then they are absolutely not doing everything right. In fact it's pretty much the opposite.
- JohnFen 7y ago
  Well, I was not privy to their entire approach, so you could be right. However, they thought they were doing it right. Nonetheless, it did, and does, give me pause.
  - pickle-wizard 7y ago
    You bring up a good point. When it comes to investing, most people don't have a clue what they are doing. This in my opinion is the biggest problem with the move from a defined benefit to a defined contribution retirement scheme. It took the investing out of the hands of the people that knew what they were doing. Along those lines it really grinds my gears how the financial industry is ripping off people who are saving for retirement. Most 401k plans I've seen have incredibly high fees with a few investments that charge equally as high of fee. Especially those at small companies.
    - JohnFen 7y ago
      > When it comes to investing, most people don't have a clue what they are doing. This is why I largely avoid investing (I do have some money in index funds, though). I know that I don't know what I'm doing in that world, and I also lack the time or interest required to become competent in it.

weaklearner 7y ago

frankly I am quite skeptical of the macro-economic predictions of a 'blockchain mark consultant'