With much media attention given to millennials and baby boomers, each for their respective reasons (millennials supposedly being entitled and lazy, and boomers because they supposedly ruined the economy), there is one generation that seems to be forgotten.
That generation is, of course, the one sandwiched between boomers and millennials; Generation X. Gen X-ers, as they are commonly referred to, were born between the years of 1965-1979 (ages 39-53 currently).
Not only are they overlooked, they are entering a period that could prove extremely difficult for the majority of them. A lot of these Gen-Xers are starting to think about retirement and a lot of them are realizing that they are extremely under-prepared relative to their stage of life.
Most Gen-Xers have a lot of things going on in their life requiring a lot of financial attention; school-age children, rising housing costs and interest rates, saving for their kids’ future education, potentially their own student loans, and aging parents to attend to. With all of that to look after, how is one supposed to find any money to contribute to retirement savings? A lot of Gen-Xers are finding this out first hand as they move toward retirement faster than they expect.
According to surveys and studies the average Gen-X has only accumulated $35,000 in retirement savings. Not a lot when you compare it to the fact that Gen-Xers believe they need about $500,000 to retire comfortably.
Interesting side note, the average millennial has accumulated a similar amount of retirement savings as the older counterparts, generation x.
So why haven’t these Gen-Xers saved more? Logically, you would think they should have a lot more saved than millennials. Generally, Gen-Xers will be earning higher salaries and are more established in their careers.
In the surveys mentioned earlier when asked why they hadn’t saved more their response was; income is too low and expenses are too high.
Although this might be part of the problem another is the over-reliance on government pension benefits. The belief that even if you don’t save a lot for retirement, government benefits will be there to save the day. This reliance may be a conscious acknowledgment or a subconscious belief.
As nice as that would be, it might not be all that practical. In Canada, Canada Pension Plan and Old Age Security will cover about half the expenses of the average retiree. If you are 65 today and retire, you can expect about $1100/mon from CPP and another $580/mon from OAS.
So, since we have established that Gen-Xers are behind on their savings, where should they actually be in correlation with their age?
According to Fidelity, workers should have about three times their salary socked away by age 40, four times their salary by 45, and six times their salary by 50. The median household income in Canada is around $75,000. So if we use that number, by age 40 you should have about $225,000, age 45 $300,000, and age 50 $450,000.
If these are the benchmarks to aim for, what is the best way to obtain these goals? Use a financial planner. A good financial planner/advisor will help establish your goals, devise a plan to optimize your savings patterns to help meet your goals and build a portfolio that goes with your stage of life and risk tolerance.
If you don’t already have a financial planner/advisor, don’t worry, we have already written a blog post to help you find the right advisor to suit your needs. To read that blog post click here.
To put the value of a financial advisor into perspective, non-retired Canadians with an advisor are three times more likely to have saved more than $100,000 for retirement than those without one (49% vs. 16%).
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https://www.investmentexecutive.com/news/industry-news/gen-x-not-prepared-for-retirement-survey/
https://www.fool.com/retirement/2018/02/07/heres-what-gen-xers-have-saved-for-retirement.aspx
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