Saving Gen-X
"So, why does Generation X seem to be so much better prepared financially than their parents?" asks Lisa Predella in Fidelity Investor's Weekly. Chalk some of the credit up to sites like our own pfblog.com says Jeffrey Carney, president of Fidelity Personal Investments, because "[Gen-Xers] are Web savvy and have a real appetite for technology, so they're taking full advantage of better access to information and financial education."
Carney also notes, "Fortunately, the defined contribution environment is getting better at providing tools, education, and resources to help people understand not just the importance of saving for retirement, but also how to do it properly."
[Personal Note:] My experience has been my company could do more in this space. We have a nice interface to manage our 401(k)s through Fidelity (where I also have all of my other money), but I find it annoying for the less financially-savvy that there are no lifecycle funds available to us.
Additionally, the article notes "Gen-Xers seem to accept their responsibility and move on" since our expectation of Social Security or pension benefits in retirement is very low ("only 39% of Americans ages 21-34 expect to rely somewhat or a lot on the government for support during retirement"). Personally, I've opted to go it on my own, foregoing pension options for the opportunity (and risk) of running my own companies. I take responsibility for that knowing that if I refuse to work "for The Man" that I can't expect "The Man" to pay for my retirement. It seems many in my generation agree with me.
Rick Davis, a 35-year-old mortgage banker with Chase Home Finance in Seattle, Wash., says "[Our parents] expected to work for one company. We don't. They had pensions, regardless of how much they put away on their own, and we don't. I think Generation X accepts that as the condition of the world. We're less afraid of risk, and definitely more self reliant," he says, "which is why a lot of young people I've seen have a fair amount of money put away already."
The common theme isn't just awareness; it's also ownership and responsibility. Early retirement is out there - and we know we have to go get it.
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Excellent post! I think that comment by Rick Davis is accurate in the sense that most Gen-Xers realize that company pensions aren't going to be the basis of their retirement, but I question the idea that most people of this generation are actively using the tools offered by Fidelity and others to plan for the future.
Most people I talk with in my age bracket (30s) really don't know how to choose mutual funds, analyze their portfolios for redundant or risky allocations, or for that matter max out their 401k contributions. The 401(k) contributions may be a local issue; where I live renting or buying a place to live is extremely expensive, and lots of people may not have the luxury of contributing a lot of money to their retirement accounts.
F.O. - Thanks for the comment. There's certainly a lot of education to be had, especially with younger folks who really can make or break their retirement with current savings.
As a financial planner I see way to many 20- and 30-somethings not saving enough. Some don't even take the full match on their 401(k)s from their companies. Expensive house or not, don't flush free money down the expensive toilet!
I plan to write more on simple techniques for allocations and hands-off investing. Send your friends my way and have them post their questions.
One of the more interesting quotes in the article:
"Gen-Xers have learned to consider saving for retirement as part of the expense of life."
Costco offered my wife a bribe (some gift card deal) if we'd attend to a free consultation with a certified financial planner.
He asked about our goals. I'm a 30 year-old married man with a house and a baby. I told him retirement was our top priority.
He seemed puzzled. "Why do you feel like you need to save for retirement?"
I was confused. His question just didn't make sense. It was like he asked me why I felt the need to wear pants in public. I repeated it over and over in my head. Did I mishear? I asked him to repeat the question.
"Why is it important that you save for retirement?"
I mumbled some reply and started looking for an exit. 10 minutes later he finally let us leave, but not until after I coldly rejected his hard sell on a $900 financial plan (with charts and graphs, oooh!).
I don't know. Maybe its just us. But my entire life, every week in the newspaper, TV and radio, there's been nothing but story after story (and ad after ad) about the importance of saving for retirement. My wife feels the same way. We can't imagine NOT saving...
"Nobody" - (don't you have a name? come on, make something up) - I have no idea what kind of financial planner would say something like that. I shudder to think someone is using the term for their profession while making statement that ignorant. However, I know it's all too common. I would simply suggest that people make the same choice you did and find a real planner (CFP).
