As a Gen Xer, I often feel like a part of the “forgotten” generation. One doesn’t have to look far to see the abundance of media attention paid to baby boomers retiring and millennials finally buying homes and having families. In 2019 the youngest Gen Xers will turn 40 years old, while their older counterparts have already reached their mid-50s. Gen X’s early retirees are likely to fly completely under the radar as they leave the workforce while the news still focuses on the aging boomers.
Let’s look back at some of the financial challenges and opportunities our “forgotten” generation has faced and explore how we can optimize our financial lives as we enter what could be our last decade or two in the workforce.
Many Gen Xers bought their first homes in the real estate frenzy of the late 90s and early 2000s, only to see home values crash when the financial crisis hit. Most of us weren’t home owners during the high-interest 80s — although we’ve all heard stories from our parents or others of mortgage interest rates well into the teens — rather, we’ve benefited from a decade of historically low interest rates. This has allowed us to save money through a mortgage refinance and/or buy a larger or nicer home to fit our growing families.
When it eventually comes time for us to downsize, there could be excess inventory of one-level living villas, condos and townhomes put on the market by exiting baby boomers for us to scoop up at attractive prices.
On the downside, we’ve lived through two of the most impactful stock market crashes in recent history: first, the dot-com bust of the early 2000s and then the financial crisis and Great Recession in 2008-2009. One might think this is extremely unlucky. But for Gen Xers with plenty of runway before retirement, in hindsight, it was a great opportunity to “buy low” for those who took advantage of it through payroll deferrals into 401(k) plans and other investing.
Looking forward, since most Gen Xers still have a decade or more left to work, now is not the time to let the recent stock market volatility shake your confidence in your long-term savings. Time still affords us the ability to be moderately aggressive in our investing and reap the returns the market has historically provided over long periods of time.
The independence of traveling by car whenever and wherever you want has now benefited several generations. This freedom is hard to give up. Many of us have heard conversations between our parents, aunts and uncles about when to take Grandma or Grandpa’s keys away from them. We now have additional options such as Uber and Lyft, and mass-transit options continue to grow in urban areas. Will self-driving vehicles be on the roads by the time our children question our safety behind the wheel?
As boomers exit the workforce in droves, Gen Xers should be primed to assume more leadership opportunities. While exciting, these can be stressful years. Since many Gen Xers waited until later in their 20s or 30s to have a family, work-life balance can feel like an unattainable myth right about now.
According to Business Insider,1 life satisfaction dips in middle age after first peaking at age 23 and peaking again at age 69. Exhausted from the demands of one’s career, Gen Xers chauffeur kids to their endless after-school activities, help with homework, stress over how to pay for college, and help care for aging parents — ending up with little time for themselves. Rather than dreaming about finally having some “me time” in retirement, which still may be years away, finding time to practice mindfulness and gratitude can help you get through this challenging stage.
So, I’ll offer three pieces of advice as we Gen Xers look ahead:
1. Save Early and Often
You’ve heard it before, but save as much as you can, as early as you can. As Gen Xers are climbing the career ladder, lifestyle creep can come into play and leave you with nothing left to show for your higher income. Increase your savings into your 401k and/or IRA and take advantage of “catch-up” provisions, which allow you to save even more after you turn 50. You’ll thank yourself later!
2. Don’t Assume Change Isn’t Coming
Don’t assume today’s low interest rates, low inflation and low tax rates will continue indefinitely. We’ve been spoiled with all three of these for a long time now, but it’s unlikely they will continue forever. Someone is going to have to pay for our government debt and the havoc we’re wreaking on our environment.
3. Plan for Longevity
Dr. Joe Coughlin, Director of the MIT AgeLab said, “We have a longevity paradox. Now that we have achieved what humankind has tried to achieve since it has walked — living longer — we really don’t have a good idea of what do to with all that additional time.”2 So pick up a new hobby or two (I know spare time is hard to come by, but it will help with the elusive work-life balance conundrum). After all, some Gen Xers could be around to see the year 2100,3 and you can bet we’ll be sitting around in our rockers reminiscing about how we used to party like it was 1999.