Gen-X Is Worried

There are some memes and other types of jokey posts about Gen-X being tough, I remember one where a millennial said that if there was a zombie apocalypse that somehow Gen-X would know what to do. I'm older Gen-X and I don't know whether we're tough or not but to hear Barron's tell it, we've made financial mistakes and we're willing to talk about it. 

For the few readers who go back to the beginning with me in 2004, the article captures a list of all the things I started talking about back in my 30's, I'm 59 now. Nassim Taleb used to talk about the wisdom of grandmothers, we learn a lot of what we need to know as children from our grandmothers and it is up to us to just keep it simple and do what they told us. 

A recurring sentiment was wishing they'd started saving earlier. There were comments about not being able to envision getting close to retirement age and as a result 2/3 of Gen-Xers surveyed by Cerulli have less than $100,000 saved for retirement. There's a theory about not being able to understand beyond 50% greater than your current age. A 30 year old wouldn't be able to understand what it would mean to be 60 for example. There's something to it anyway and not envisioning pre-retirement age would seem to play into that theory. 

Cerulli cited a misconception that there was plenty of time to start saving." The youthful perception of time is one of abundance—planning for a decades-away event such as retirement can be hopelessly abstract." 

There was a segment of Gen-Xers surveyed who regretted years of overspending and taking on too much debt. 

"...many Gen Xers now say they wish they had prepared for challenges such as the loss of a job or personal issues such as a health crisis or the death of a loved one when they were making financial decisions in their youth."

We've been tackling these exact issues for more than 20 years not because of any keen insight but because they are all obvious things. We literally learn as children to save for a rainy day. At some point as children we heard something about too much debt even if we didn't hear it enough. When you were a kid, did your parents ever have you save up for something you wanted and have you buy it with your own money? There are all kinds of lessons in that exercise including delayed gratification which I think ties into optionality. 

You can buy a pack of baseball cards every week or save that money to buy a new baseball glove later. I'm not sure about the baseball cards in that equation but that is how I bought my Rawlings Reggie Jackson baseball glove in 1977 that I still have today. Sticking with example though, after a couple of months or whatever, I had the option to buy a ton of baseball cards or the glove. 

There were hints about living below your means but I have always placed a very high priority that. Whether it was the baseball glove episode or not, the importance of optionality is something I figured out a long time ago and living below your means (saving more) is the path to financial optionality. This becomes easier if you can figure out what you really want. I want freedom (setting my own schedule, owning my time) not riches. It takes a lot less in the bank to be free than it does to be rich. 

If someone is 50-55 with $100,000 in their 401k and wondering how they are going to retire, they'll figure something out because they have to even if it's not their idea of an ideal or easy retirement. At that age there is time left for those gainfully employed to make some changes, all the better if they catch a tailwind in terms of market returns. The one thing they can't do is throw a pity party for themselves and give up. 

There is still time to turn a robust emergency fund ($100,000 in this context is a pretty good emergency fund) into a big enough piece of money to be a useful income stream by putting more into 401ks if at all possible and letting the stock market do its thing. Contributions limits are quite high, $31,000 for ages 50-59, going to $34,750 for ages 60-63 plus any employer match. Not everyone can save that much I realize but 10-15 years of contributions plus matches plus compounding will add up. 

Of course I am also going to say that physical optionality is just as important as financial optionality. Harshness coming, if you don't have a gut, keep doing what you're doing to avoid getting one and if you do have a gut, cut carb and processed food consumption and see how quickly it goes away. And just as important, lift weights to build muscle mass. No gut and building up some muscle mass is a path to physical optionality. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.