C'mon Gen-X, You Still Have Time To Rally

In more than a couple of instances, I have titled blog posts C'mon Gen-X, Time To Rally about my generational cohort having trouble getting to where they need to be in order to retire without making enormous sacrifices. I would count not actually being able to retire as an enormous sacrifice as well as not being able to spend money on anything but the most basic of needs; food, shelter and healthcare.

The prompt for this post was a quick look, really not a review, just a cursory look at a book called Retirement Bites which is a play on words for the Gen-X anthem-ish movie Reality Bites. As an older Gen-Xer I'd say that Breakfast Club or to a lesser extent Pretty In Pink defined our cohort. The book is written by Kerry Hannon from Yahoo Finance. Here's a gift link that has more about the book.

Hannon and her coauthor Janna Herron believe in needing to figure any psychological hangups people have with money like growing up with very little money or any other sort of financial trauma. I'm not huge on this but I might have a bias here. My parents were terrible with their money and it was easy for me to recognize as a kid how difficult they made things for themselves. I've described this before as benefitting from their mistakes. 

All aspects of retirement should be long term focused. If you have been accumulating money along the way, hopefully you started at a youngish age. As you approach 50, still a long way from retirement, hopefully you make some effort to understand what sort of numbers you will need with more depth than just saying 80% of your income or some other vague rule of thumb. 

Social Security also lends itself to long term planning. Here's the latest from Bloomberg that points to benefits being reduced as soon as 2032. The thinking is still cuts to payouts just under 25% which is not a new number and while it sounds big, anyone paying attention has known about this for years and still has quite a few years to go to figure out how to mitigate the impact. I still don't think there will be a cliff for people above a certain age but I see less commentary/theory agreeing with my assessment. 

Social Security wants us to know how much we're getting in today's dollars, so then just lop off 1/4 to know what you're likely to get. At 50 or 60, you have plenty of time to digest the numbers and plan accordingly. 

There is wide agreement that Social Security, reduced or not, is not intended to be sufficient for most people but it can be significant. A $3000 payout as part of an $8000 lifestyle is significant. We talk all the time about figuring out how to monetize something like a hobby or a volunteer gig. This also needs to be a long term process to create, or at least odds of success go up playing the long game with this. 

Sticking with the $8000 lifestyle example, bringing in $2000, $3000 or $4000 from a monetized hobby or volunteer gig turned paid gig would again not be sufficient but would be significant. 

Bloomberg also talked about retiring to another country, focusing on France, Costa Rica, Spain, Italy and Panama for this article. One of the comments on the WaPo link for the book review glance said he rents his house out in California and lives in Central America. That is exactly what we've talked about here. There are plenty of places where Social Security plus rental income from a mortgage free house back in the states will be sufficient in case the retirement account is more of an emergency fund. 

We've talked countless times about keeping the house in the US in case you need or want to come back or get out of where you moved even if just temporarily. We last looked at Ecuador in this context  but the war in the middle east is another example. This article from the WSJ creates the impression that Dubai was believed to be impervious to any sort of mid east conflict. It seems like an easy risk to mitigate, something going really bad in whatever country you chose and having an easy option to come back. 

What about continuing to work? Plenty of people are desperate to stop working while others never want to retire. Continuing to work can go in several directions like scaling down hours and then sticking with it for a while or maybe delaying retirement by two or three years to build up account balances, reduce (even if just slightly) the number of years that the money needs to last or in some cases literally never retiring as a matter of choice. 

In the meantime though, the way the Retirement Bites authors describe it, Gen-X is in a lot of trouble. At 50 or 55 or 60, someone making a decent income but that just never got around to saving money due to life circumstances could plausibly find themselves mortgage free, kids up and out and now able to start saving. That is not too late to build up a bit of a retirement fund. At 60, with no retirement savings, only a generous pension would spare that person from having to work a good bit longer but 10 or 15 years is enough time to build up a piece of money that would generate a significant income in the context of our $8000 example above. 

I'll close out by paraphrasing Joe Moglia, no one will care more about your outcome than you so c'mon Gen-X, you still have time to rally. 

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.