Generation X : Savings slackers or victims of advisor negligence?
By Paul Wilson
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Members of Generation X have long dealt with a tenacious reputation as disillusioned loafers apathetically wandering their way through life. But as these 84 million Americans reach middle age, evidence to the contrary is beginning to mount.
The results of a 20-year study released last year went a long way toward dispelling long-held concerns that GenXers would fall short of the standards set by baby boomers and members of the World War II generation. Instead, they are “active in their communities, mainly satisfied with their jobs, and able to balance work, family and leisure,” the report says. The study’s author, Jon Miller, describes GenXers as a resilient bunch. In fact, he goes so far as to say that, “Previous generations would have been hurt even worse by this recession.”
But resilient or not, there’s no doubt that the recession has taken its toll on Generation X. A new poll from the Insured Retirement Institute found that two-thirds of GenXers believe they will not have enough money to cover retirement expenses.
Nearly one-quarter stopped contributing to their retirement accounts during the recession, while 15 percent made early withdrawals from their 401(k) plans and 22 percent stopped contributing to college savings plans.
More alarmingly, just 37 percent have consulted a financial advisor, a number that falls to a mere 20 percent among single GenXers.
According to James R. Veal, founder and managing member at JRV Wealth Management Group, LLC, Generation X has been momentarily swept under the rug by many advisors who are intently focused on the 76 million baby boomers.
“I have more [boomers] coming in to see me through referrals and asking for help because they are about to retire. It is amazing the number of people who come in with large pension checks who have never consulted with a financial advisor. But it is a whole different story for GenXers, and I believe they are going to be in more need of financial advice.”
GenXers grew up with working moms and higher divorce rates, an environment that has led many to become independent, adaptable and determined, he says. However, “due to uncertainty, the current economic climate, and job insecurity, they are very suspect of preparing adequately for retirement.”
He recommends that advisors significantly alter their strategies while working with different generations. For example, many boomers have benefited from pensions and receive Social Security payments, making them more adaptable and open to working with advisors. Members of Generation X, on the other hand, are often reluctant to accept authority, “have to be approached with open arms and expect more one-on-one attention,” Veal says. When asked to predict how Generation X will fare in retirement compared with their predecessors, Veal is cautious.
“I sure do hope most of Gen X will eventually understand the importance of retirement preparation, but I do not believe the majority of them will be better prepared for retirement than the baby boomers. The boomers were savers, used less credit cards, and didn't spend much of their discretionary income. The 3-legged stool was quite sturdy for them. The biggest question for the Gen X members is, will the stool crumble and fall? Uncertainty in the job market, an anemic U.S. savings rate, and the loss of company pensions has placed a serious burden on Generation X.”
Veal also has a word of warning for advisors who may be overlooking this important demographic.
“We know it's an absolutely great opportunity now to work with baby boomers because they have the most money and come see us with big lump-sum-distributions (pensions), but there is another generation out there that may have the same potential and they need our help. In fact, when these baby boomers pass on, the Gen X children and their heirs will be in control of the money. Those who are in position to have assisted the entire family will be the ones they put their trust in. I read a recent report that over 60 percent of widows and heirs do not hire the same financial advisor as their parents had. That should tell us something. Generation X is to be taken serious and if we neglect them, our retirement planning businesses will not be financially prepared to give retirement planning advice.”
Have you been guilty of neglecting Generation X in favor of the boomers? Do you have advice on different generational approaches that have worked for you? Share your experiences in the comments section below.