Gen Xers Worry About Running Out of Money In Retirement
So, here’s a news release I received today about the latest study outlining the miserable state of affairs for Generation X. This one comes from PwC and reveals that Generation X employees are struggling the most financially, and are most likely to dip into retirement savings.
Sadly, it appears things are not going to get any better financially for Generation X. In fact, it’s going to get worse. We not going to earn as much as our parents earned because the strides you make financially aren’t going to keep pace with inflation. (Check out this post I wrote in 2011, Housing Crisis Erodes Net Worth of Generation X.)
NEW YORK, June 18, 2013 /PRNewswire/ — Generation X employees – those born in the early 1960s to the early 1980s – struggle the most when it comes to juggling competing financial priorities related to their homes, children and parents, reveals PwC US’s 2013 Employee Financial Wellness Survey. As a result, more than one-third (36 percent) of Gen X employees think it’s likely they will need to dip into their retirement savings to pay for non-retirement expenses, a percentage significantly higher than for both Baby Boomers and Gen Y, the “Millennials.” Thirty percent of Gen X employees admit having already withdrawn money held in their retirement plans for expenses other than retirement.
“Gen X employees are in a unique financial situation. They’re often faced with the full spectrum of financial issues – from having to fund children’s education to caring for aging parents – while dealing with day-to-day household expenses,” says Kent Allison, Partner and National Practice Leader of PwC’s Employee Financial Education practice. “These competing financial pressures, along with already depleted equity in their homes, exacerbate America’s retirement crisis as employees believe they have no choice but to turn to their retirement savings to focus on short-term needs.”
Retirement confidence remains low
Lingering financial challenges continue to weigh down retirement confidence: significantly less than half (35 percent) of employees express confidence they will be able to retire when they desire, reflected in the finding that employees ages 45-54 possessed the lowest retirement confidence over the last three years.
|Retirement Confidence by Age, Year over Year|
|Age 21 to 34||41%||38%||36%|
|Age 35 to 44||38%||24%||37%|
|Age 45 to 54||24%||21%||24%|
|Age 55 to 64||29%||25%||37%|
Although overall employee financial stress across generations decreased to 52 percent this year from 61 percent in 2012, financial stress continues to impact employee productivity. Twenty-three percent admit that personal finances have been a distraction at work. Of those, 19 percent say they spend five hours or more at work each week thinking about or dealing with issues related to their personal finances.
“The leakage from retirement plans reemphasizes that employees are facing immediate financial issues that compete with their focus on long-term savings for retirement,” says Allison. “The impact of this conflict can be seen beyond employees’ saving accounts. It becomes a key concern for employers that may see older, less healthy, less productive and more expensive employees working longer, impacting the bottom line and reducing the younger generations’ opportunities for advancement.”
Employees’ Biggest Concerns about Retirement*
Running out of money – 45%
Healthcare costs 38%
Not being able to maintain my standard of living 26%
Health issues 25%
Not being able to meet my monthly expenses 21%
I don’t know what to do with my free time 11%
Not leaving any assets upon my death for my family, charity, etc 4%
Meeting education expenses for child/children 4%
Managing my investments in retirement 3%
Other expenses for children (e.g. wedding expenses) 2%
* Respondents could choose up to two answers
Healthcare a greater concern
Healthcare costs rank among the top of employees’ retirement concerns, with 38 percent citing it as a concern. The fear of losing healthcare coverage drives an increasing number of people to delay retirement: 29 percent this year, up from 21 percent in 2012.
More than half of the employees (53 percent) with health insurance say they are covered by a high- or mid-deductible healthcare plan, a reflection of the rise of consumer-directed health plans. While employees are concerned about healthcare costs, only 35 percent of those covered by a high or mid-deductible plan contribute to a health savings account (HSA) and of those, only 12 percent indicate that they plan to use the funds as a means to meet future medical expenses in retirement.
Notably, the majority of those closest to retirement age are planning ahead: of the Baby Boomers planning to retire within the next five years before the age of 65, two out of every three employees have a plan for covering their healthcare expenses before becoming eligible for Medicare. Forty-three percent of Baby Boomers are confident they will be able to cover their medical expenses in retirement.
“As life expectancies extend, these concerns will only increase over time,” says Allison. “The burden of saving for retirement has shifted to the employee with the rise of defined contribution plans. So it’s important for them to understand the benefits of options such as HSAs that allow them to meet current and future healthcare costs. The under-utilization of HSAs is an education issue that we encourage employers to address in their financial wellness programs.”
Despite some improvements, cash flow still a major issue
Cash flow issues continue to top employees’ financial concerns, with anxieties about insufficient emergency savings for unexpected expenses (49 percent), delayed retirement (45 percent), and not being able to meet monthly expenses (22 percent) among the top concerns. Additionally, almost half (49 percent) of Gen X respondents find it difficult to meet their household expenses on time each month, as compared to Baby Boomers (31 percent) and Millennials (30 percent).
|Employees’ Financial Concerns by Generation|
|Find it difficult to meet household expenses on time each month||Consistently carry balances on their credit cards||Find it difficult to make their minimum payments on time each month|
|Baby Boomers(Age 53-70)||31%||42%||23%|
|Gen X(Age 32-52)||49%||58%||44%|
Employees’ Financial Concerns by Generation
“Despite key economic indicators showing signs of improvement, a more sustained recovery is likely required before a significant positive impact occurs for employee financial wellness,” says Allison. “People often expect immediate improvements when the market climbs; however, employees’ financial situations don’t turn on a dime. With employees continuing to experience effects of the economic downturn, employers have an opportunity to drive change to employees’ financial behaviors. Recognizing this, more and more companies are implementing holistic and proactive financial wellness programs that help their employees deal with the stresses of competing financial priorities without sacrificing their future, ultimately leading to a more productive and healthy workforce.”
The Totally Sweet 90s
If you can’t bear all that bad news and you just want to crawl under the covers and relive your youth with something sweet, check out Gael Fashingbauer Cooper and Brian Bellmont’s new book The Totally Sweet 90s. This is the team that brought us Whatever Happened To Pudding Pops?
From the Publisher
If you can tell the difference between the Petes in Pete & Pete, know every step to the Macarena by heart, and remember when The Real World was about more than just drunken hookups, The Totally Sweet ’90s will be a welcome trip down memory lane.
With this hella cool guide, you’ll reminisce about that glorious decade when Beanie Babies seemed like a smart economic investment and Kris Kross had you wearing your pants backward. Whether you contracted dysentery on the Oregon Trail or longed to attend Janet Reno’s Dance Party, you’ll get a kick out of seeing which toys, treats, and trends stayed around, and which flopped.
So throw your ponytail into a scrunchie, take a swig from your can of Surge, and join us on this ride through the unforgettable (and sometimes unforgivable) trends of the ’90s.