Spanked on Retirement, Gen X Still Doesn't Get It

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Spanked on Retirement, Gen X Still Doesn't Get It

Postby Marmot » Sun Jun 23, 2013 7:04 pm

SAIP - I did not see this anywhere. Interesting read. I was shocked at the high percentage of people taking 401K loans at my place of work. They seem to think it is just "another bank account". Bogel was right about how the 401K is viewed as a thrift account.


http://www.cnbc.com/id/100834761

For the record - it is employees from all generations that are taking loans from the 401K's, it is not generation specific.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby nedsaid » Sun Jun 23, 2013 7:22 pm

This is why people need an emergency fund.

Too many folks have all their savings in their 401k. No wonder why these accounts get tapped all the time.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby IlliniDave » Sun Jun 23, 2013 7:34 pm

nedsaid wrote:This is why people need an emergency fund.

Too many folks have all their savings in their 401k. No wonder why these accounts get tapped all the time.


I'm right on the cusp between baby boomer and gen X. I borrowed twice out of my 401(k). I agree that having a dedicated emergency fund separate from retirement accounts is a good idea. I tried using credit for emergencies, then wound up using a 401k loan to consolidate/pay down the revolving lines. Poor personal financial management. I'm single again now so the ship is again tight. I'm lucky all that didn't bite me big time. Another popular approach is to use it for the kids college fund. That was my plan for several years too. Luckily when the time came I didn't use it for that. I was quite a fool.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby ladders11 » Sun Jun 23, 2013 9:04 pm

Honestly when you have employer matching funds, the 401k can be considered "optional salary" where you need to elect how much of your employer's money you're going to take.

Especially when you have a wide option (2-30% of gross pay 66% matched), it is tempting to have this 401k invest into a money market, in order to protect this income like anyone would protect their paycheck, and use it like a bank account, because you're redirecting money from your bank account into the 401k just to get the match.

Let's say you need 80% of your income and want to save 20% - you would want to choose the 30% savings in order to get a 20% match bonus, and then borrow the other 10%.

Rationally, some of my paycheck should go towards retirement, some towards monthly expenses, and some towards short term savings goals (car purchase, travel, insurance, property taxes, christmas shopping, etc) - so there's always a need for savings that is not retirement. What makes sense is to take as much of the employer dollars as possible and then find a workaround to use it to deal with the other savings needs.

In no way would I agree with the "still doesn't get it" assertion. Savings rates are minimal; credit is easy; real estate has gone badly; tuition is a hardship. People respond to the incentives they're given and deal with the circumstances they fall into.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Grt2bOutdoors » Sun Jun 23, 2013 9:17 pm

I don't like studies that use open ended questions like this: "Are you confident about being able to retire? Let's see if you are Gen X or Millenial or even a Boomer, but lose your job in this recession - would you be confident? What about if all of your retirement savings were essentially at risk as they have zero pension by their employer and continue to hear the doomsday scenario of no Social Security at retirement? How about if they did have some savings put away and were continuing to save at a relatively decent clip but yet knew nothing about the market, rebalancing and/or reducing risk over time, their employer provides no information on planning for retirement and they have zero clue where to obtain unbiased and relevant information - would you be confident of retirement?

The only one who needs to be spanked are the authors and publishers of studies like this. :twisted:
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Texas hold em71 » Sun Jun 23, 2013 10:35 pm

Well, at least they have stopped calling us slackers.

I really dislike any article that describes a whole generation of people in one broad swath. I know plenty of Gen Xers who are financially secure and headed towards retirement. I know plenty of Boomers who are not. Some of those Boomers at least have a DB pension to fall back on and are reasonably assured of Social Security being there.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby stevewolfe » Mon Jun 24, 2013 8:38 am

Texas hold em71 wrote:Well, at least they have stopped calling us slackers.

I really dislike any article that describes a whole generation of people in one broad swath. I know plenty of Gen Xers who are financially secure and headed towards retirement. I know plenty of Boomers who are not. Some of those Boomers at least have a DB pension to fall back on and are reasonably assured of Social Security being there.


This aligns much more closely with my experience than the results of the study. The reality is the SS trust fund, under current law and taxes, is set to be exhausted in 2033, 5 years into the retirement age of Gen-X. It was 2037 for a while, a year near and dear to my retirement heart... but even then, SS is set to be able to pay 77% of benefits from current taxes projected to that date (SS Press Release May 31, 2013). How could this not cause some uncertainty among folks in this generation? As mentioned, this generation also saw the freezing of the vast majority of non-government pensions during their working careers as well.

So against this backdrop there is a bit of struggle for some folks - hardly shocking. I would imagine folks in the ages of 32 to 52 would be buying their first or a trade up home just in time to get whacked by the first national decline in home prices... Not to mention the .com collapse and you've had two major market meltdowns during this generations investing lifetime. So again, uncertainty wouldn't be much of a surprise here. I'm not sure any of the information in the survey is actionable or really meaningful over the long run.

In other words, I'm not sure that there is some critical financial acumen lacking in this generation that an extended bull market would not fix ;) :beer
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby investingdad » Mon Jun 24, 2013 8:50 am

Texas hold em71 wrote:Well, at least they have stopped calling us slackers.

I really dislike any article that describes a whole generation of people in one broad swath. I know plenty of Gen Xers who are financially secure and headed towards retirement. I know plenty of Boomers who are not. Some of those Boomers at least have a DB pension to fall back on and are reasonably assured of Social Security being there.


Count my wife and I as another Gen Xer set that is ahead of the game thanks to thinking ahead in our (gasp) 20s. Perhaps we should have an article on Gen Xers that are spanking the Boomer set as a whole? I'd love to participate in that one.

(I'm also tired of the 'slacker' thing, we're mid career for goodness' sake yet I continue to see goofball articles that paint my generation as somehow never growing out of a college mindset. Enough already.)
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby MnD » Mon Jun 24, 2013 10:01 am

Wait.......
32 to 52 is Gen X????
I've been claiming that I'm a tail end baby-boomer (1962) for decades.
I feel so young and slackerish all of a sudden! Crack out the XBox 8-)
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby englishgirl » Mon Jun 24, 2013 11:45 am

So it seems that we're still slacking. Just in other ways than we did before. :oops:

But at least I always thought I was one of the older Gen X'ers. Now I find I'm squarely in the middle. Like MnD, suddenly I feel so young, hehehe.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby camaro327 » Mon Jun 24, 2013 12:16 pm

nedsaid wrote:This is why people need an emergency fund.


I think some people had an EF and turned it into a vacation fund, new car fund, etc.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby bungalow10 » Mon Jun 24, 2013 12:23 pm

investingdad wrote:
Count my wife and I as another Gen Xer set that is ahead of the game thanks to thinking ahead in our (gasp) 20s. Perhaps we should have an article on Gen Xers that are spanking the Boomer set as a whole? I'd love to participate in that one.

(I'm also tired of the 'slacker' thing, we're mid career for goodness' sake yet I continue to see goofball articles that paint my generation as somehow never growing out of a college mindset. Enough already.)


+1

I'm a late gen-Xer (1978 - I get to choose between X and Y) and doing fine, thank you.

Since we are generalizing... Baby Boomers spend as fast as they earn.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Hub » Mon Jun 24, 2013 1:54 pm

I'm on the tail end on the young side of Gen X, but my peers are pretty much all my age and older. These Gen Xers are almost universally making high incomes in their 30's, but I really don't have a good handle on what they're saving. I often get the impression, based on consumption spending, that I'm surrounded by people who both make more money and save less % than me. Though I have no doubt they're almost all saving something decent into 401ks, just not an amount that causes any pain.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Ice-9 » Mon Jun 24, 2013 2:12 pm

I'm solidly in the Gen X era. I thought I was way behind at age 32 several years ago, so I studied Bogleheadism and worked hard on saving and asset allocation. Now at 40 I'm not wealthy, but I feel comfortable about retirement.

The occasional look I get at my friends in my peer group, however, tells a different story. A few of them "have a guy" they shell out money for to handle their investments, and those are the ones that are better prepared. Some haven't been saving at all for retirement. Some clearly must not have emergency funds at all, when while giving no thought to what seems like extraneous expenses (including a MAID!) they can't even come up with a couple hundred bucks when a minor emergency happens. Some spend on these types of things while thinking nothing of tens of thousands of dollars of debt they've accumulated.

Helaine Olen, in her recent book Pound Foolish, discounts the "Latte Factor," saying frivolous spending on various things simply can't be the reason so many Americans are so unprepared for retirement. I couldn't believe this sentiment when I read it. Cutting out lattes and all the other little luxuries the phrase has become a metaphor for, can mean the difference between only paying the minimum payment and really putting a dent in your debt. It can mean the difference between not contributing to retirement at all and at least contributing up to the employer match. It can mean the difference between only contributing a little and contributing a lot. I read that chapter in Olen's book two weeks ago, and it still makes me angry that she made that argument. My generation really needs to pay attention to the "latte factor," whether or not the guru who coined the term is a credible source.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Frengo » Mon Jun 24, 2013 2:17 pm

nedsaid wrote:This is why people need an emergency fund.

Too many folks have all their savings in their 401k. No wonder why these accounts get tapped all the time.

I'd say that's why people need a pension system...
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby bungalow10 » Mon Jun 24, 2013 2:56 pm

Ice-9 wrote:I'm solidly in the Gen X era. I thought I was way behind at age 32 several years ago, so I studied Bogleheadism and worked hard on saving and asset allocation. Now at 40 I'm not wealthy, but I feel comfortable about retirement.

The occasional look I get at my friends in my peer group, however, tells a different story. A few of them "have a guy" they shell out money for to handle their investments, and those are the ones that are better prepared. Some haven't been saving at all for retirement. Some clearly must not have emergency funds at all, when while giving no thought to what seems like extraneous expenses (including a MAID!) they can't even come up with a couple hundred bucks when a minor emergency happens. Some spend on these types of things while thinking nothing of tens of thousands of dollars of debt they've accumulated.

Helaine Olen, in her recent book Pound Foolish, discounts the "Latte Factor," saying frivolous spending on various things simply can't be the reason so many Americans are so unprepared for retirement. I couldn't believe this sentiment when I read it. Cutting out lattes and all the other little luxuries the phrase has become a metaphor for, can mean the difference between only paying the minimum payment and really putting a dent in your debt. It can mean the difference between not contributing to retirement at all and at least contributing up to the employer match. It can mean the difference between only contributing a little and contributing a lot. I read that chapter in Olen's book two weeks ago, and it still makes me angry that she made that argument. My generation really needs to pay attention to the "latte factor," whether or not the guru who coined the term is a credible source.


I'm going to disagree. I think people my age (34) need to start sweating the big stuff. Lattes aren't the issue. Being ignorant about insurance, fund fees, mortgage rates, financing cars... etc. Those are costing Gen X and Y (and everyone else) a LOT of money. Worrying about your morning latte doesn't matter when you have a ARM mortgage that is going to reset and a house that's underwater. Education is key in being financially literate and many people aren't there.

Heck, my MIL and FIL sweat the little stuff all their lives, living within a budget and never splurging. But investing their money with a financial planner who wanted to rip them off (and them not knowing any better) has let to them having a much smaller retirement balance than most would think possible based on how they lived.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Ice-9 » Mon Jun 24, 2013 3:05 pm

bungalow10 wrote:
Ice-9 wrote:I'm solidly in the Gen X era. I thought I was way behind at age 32 several years ago, so I studied Bogleheadism and worked hard on saving and asset allocation. Now at 40 I'm not wealthy, but I feel comfortable about retirement.

The occasional look I get at my friends in my peer group, however, tells a different story. A few of them "have a guy" they shell out money for to handle their investments, and those are the ones that are better prepared. Some haven't been saving at all for retirement. Some clearly must not have emergency funds at all, when while giving no thought to what seems like extraneous expenses (including a MAID!) they can't even come up with a couple hundred bucks when a minor emergency happens. Some spend on these types of things while thinking nothing of tens of thousands of dollars of debt they've accumulated.

Helaine Olen, in her recent book Pound Foolish, discounts the "Latte Factor," saying frivolous spending on various things simply can't be the reason so many Americans are so unprepared for retirement. I couldn't believe this sentiment when I read it. Cutting out lattes and all the other little luxuries the phrase has become a metaphor for, can mean the difference between only paying the minimum payment and really putting a dent in your debt. It can mean the difference between not contributing to retirement at all and at least contributing up to the employer match. It can mean the difference between only contributing a little and contributing a lot. I read that chapter in Olen's book two weeks ago, and it still makes me angry that she made that argument. My generation really needs to pay attention to the "latte factor," whether or not the guru who coined the term is a credible source.


I'm going to disagree. I think people my age (34) need to start sweating the big stuff. Lattes aren't the issue. Being ignorant about insurance, fund fees, mortgage rates, financing cars... etc. Those are costing Gen X and Y (and everyone else) a LOT of money. Worrying about your morning latte doesn't matter when you have a ARM mortgage that is going to reset and a house that's underwater. Education is key in being financially literate and many people aren't there.

Heck, my MIL and FIL sweat the little stuff all their lives, living within a budget and never splurging. But investing their money with a financial planner who wanted to rip them off (and them not knowing any better) has let to them having a much smaller retirement balance than most would think possible based on how they lived.


For the record, I agree completely - the big stuff, of course is important! But, at least among some of my peers, I'm seeing a reluctance to even look at the big stuff. Too often I'm hearing "There's simply no money leftover to invest," when I see them spend amounts on non-necessities that easily would add up to a start. They seem to be ignoring what I see as low hanging fruit; of course, everyone's priorities are different. Maybe it's just the small stuff irks me more, because I get such a better look at it, and these things seem like potential actions that wouldbn't require too much sacrifice to implement.

Edit to add: I may also be conflating "big stuff" with what I'm metaphorically refering to as the "latte factor." Perpetually financing cars, for example.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby bungalow10 » Mon Jun 24, 2013 3:12 pm

Ice-9 wrote:
For the record, I agree completely - the big stuff, of course is important! But, at least among some of my peers, I'm seeing a reluctance to even look at the big stuff. Too often I'm hearing "There's simply no money leftover to invest," when I see them spend amounts on non-necessities that easily would add up to a start. They seem to be ignoring what I see as low hanging fruit; of course, everyone's priorities are different. Maybe it's just the small stuff irks me more, because I get such a better look at it, and these things seem like potential actions that wouldbn't require too much sacrifice to implement.

Edit to add: I may also be conflating "big stuff" with what I'm metaphorically refering to as the "latte factor." Perpetually financing cars, for example.


When most people (non-Bogleheads) hear "latte-factor" these days, they probably think "I don't buy coffee, I don't have a problem". They aren't getting it. There's fat in almost any budget and you and I know that just about anyone can invest if they prioritize investing.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby greg24 » Mon Jun 24, 2013 4:22 pm

It looks like Gen X will be the same as every previous generation. Not saving enough. Oh well. Somehow we'll all muddle through, as usual.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby FinanceGeek » Mon Jun 24, 2013 4:27 pm

Marmot wrote:SAIP - I did not see this anywhere. Interesting read. I was shocked at the high percentage of people taking 401K loans at my place of work. They seem to think it is just "another bank account". Bogel was right about how the 401K is viewed as a thrift account.


http://www.cnbc.com/id/100834761


Taking loans from a 401k isn't always dumb, because doing this offers a fairly high "risk free" rate of return (you're paying yourself interest!). It can be used to contribute beyond the yearly plan maximums, avoid HCE limits, etc.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby swaption » Mon Jun 24, 2013 4:46 pm

MnD wrote:Wait.......
32 to 52 is Gen X????
I've been claiming that I'm a tail end baby-boomer (1962) for decades.
I feel so young and slackerish all of a sudden! Crack out the XBox 8-)


I'm with you. Thinking of myself in the front end of Gen X suddenly makes me feel younger, cooler, more responsible, and wealthier. I knew something didn't feel right. It's like the generational equivalent of a sex change. Who needs a sports car?!
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Ketawa » Mon Jun 24, 2013 4:46 pm

FinanceGeek wrote:
Marmot wrote:SAIP - I did not see this anywhere. Interesting read. I was shocked at the high percentage of people taking 401K loans at my place of work. They seem to think it is just "another bank account". Bogel was right about how the 401K is viewed as a thrift account.


http://www.cnbc.com/id/100834761


Taking loans from a 401k isn't always dumb, because doing this offers a fairly high "risk free" rate of return (you're paying yourself interest!). It can be used to contribute beyond the yearly plan maximums, avoid HCE limits, etc.


I think the "paying yourself interest" phrase mischaracterizes the issue. This post by market timer from another thread captures the issue effectively.

market timer wrote:Re: double taxation of 401(K) loan payments

You can increase your future tax liability with 401(K) loans, but the amount is generally miniscule. Few people make the right comparison, which is the difference between the interest charged on the loan and what would be earned in a fund of comparable risk (a money market account or stable value fund). By taking out a loan at 8% instead of having the funds earn 2% in a money market account, the borrower increases his tax liability by 6% per year multiplied by the marginal effective tax rate for withdrawals (which could be higher than marginal income tax rate due to various benefits phase-outs). Assuming a 25% marginal effective tax rate for withdrawals, in this case, the loan increases the borrower's future tax liability by (8% - 2%)x(25%) = 1.5% per year. Therefore, the 401(K) loan is equivalent to leaving $x in the 401(K) and borrowing $x at 1.5% above the risk-free rate on cash after-tax from a different source, in terms of its effect on net worth.

For this reason, barring strange individual circumstances, such as a multi-year sabbatical with no income prior to retirement, you generally want as low an interest rate on your 401(K) loan as possible.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby pteam » Mon Jun 24, 2013 5:01 pm

Great posts by ice9 and bungalow. Too many people our age save nothing for retirement and aren't even worried about it. When I talk to some of my friends on ways they can save thousands per year by just switching some things around every one of them thinks its too difficult. Ok fine keep paying thousands per year extra on junk services and save nothing at all!
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby lws6772 » Mon Jun 24, 2013 5:12 pm

greg24 wrote:It looks like Gen X will be the same as every previous generation. Not saving enough. Oh well. Somehow we'll all muddle through, as usual.

Yup, and most likely the same as every future generation. :P
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby jlawrence01 » Mon Jun 24, 2013 5:33 pm

Ice-9 wrote:Helaine Olen, in her recent book Pound Foolish, discounts the "Latte Factor," saying frivolous spending on various things simply can't be the reason so many Americans are so unprepared for retirement. I couldn't believe this sentiment when I read it. Cutting out lattes and all the other little luxuries the phrase has become a metaphor for, can mean the difference between only paying the minimum payment and really putting a dent in your debt. It can mean the difference between not contributing to retirement at all and at least contributing up to the employer match. It can mean the difference between only contributing a little and contributing a lot. I read that chapter in Olen's book two weeks ago, and it still makes me angry that she made that argument. My generation really needs to pay attention to the "latte factor," whether or not the guru who coined the term is a credible source.


I think that there has to be some balance between "looking at the Big stuff" and "looking at the little stuff". However, when people tell me that they are not "sweating the small stuff", they are also not on top of the big stuff either.

Look, I like to stop at Starbucks periodically myself. I am not going to live the ascetic life of a monk. If you enjoy it, go there occasionally. However, the habits that some people have are not "small stuff". I had a co-worker who had a $6 a day coffee and donut habit. So what about $6? Except that the $6 x 200 days a year equated to $1,200 which represents about 2% of the individual's GROSS pay. That was money that could have been places in a 401(k) which he did not have the money to contribute to. "SMALL" habits, when done daily, become the "big stuff".

When people come to me as a retired CPA for help with debt, I always require them to start writing down ALL their expenses DAILY. I would say that for most of them, they quickly "get an education" and over time, they can resolve what I call "leakages".

I do not think that Gen X is much different than most baby boomers in terms of money management. In both cases, there are a lot of people who just don't get it.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby ofcmetz » Mon Jun 24, 2013 5:58 pm

I agree with the poster who said pensions would help this. That or put the 401K in a "lock box". :wink: :wink:

I'm age 33 so I guess it makes me a generation X'er. In spite of not having a raise in 4 years, I've managed to continue to live below my means a save over 20% of gross a year. It's hard to do which is why so many don't.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Watty » Mon Jun 24, 2013 6:20 pm

investingdad wrote: Perhaps we should have an article on Gen Xers that are spanking the Boomer set as a whole? I'd love to participate in that one.



I think that that might be a lot more common than most people expect since the boomers have been going through a financial upheaval for most of their working careers.

Being a boomer I started out with pension plans and taxable accounts being the main retirement planning tools.

When I started saving, trading stocks or most mutual funds typically meant going to a full service broker since discount brokers did not become common until the 1980's.

401K's did not become real common until the late 1990's and IRA contribution limits were very low until the early 2000's. Until 1996 you could only make a $250 contribution for a non-working spouse. Roth IRA's did not exist until the late 1990's

Social Security seemed more secure when I started, but retirement benefits were also supposed to be tax free until the laws were changed in the mid 1980's.

Retirement saving environment has been very unsettled since the dot com bubble about 15 years ago. Ironically my main retirement savings have been through payroll contributions to a 401K through this time so I have actually done OK in these markets by dollar cost averaging during the down years but many were not able to do this.

If you compare this to the investing environment that the next generation has they have a lot of advantages with all the possible retirement accounts now and the low cost investing options that they have. I also suspect a lot of the Gen X people have bought houses with fixed low interest rate mortgages that will be as big a boon to them as it was for many people in my parents generation where many of the lucky ones had low single digit mortgages during the double digit inflation years.

Of course have the better opportunities doesn't mean that enough people will use them
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby mamarachel » Mon Jun 24, 2013 6:54 pm

stevewolfe wrote:
This aligns much more closely with my experience than the results of the study. The reality is the SS trust fund, under current law and taxes, is set to be exhausted in 2033, 5 years into the retirement age of Gen-X. It was 2037 for a while, a year near and dear to my retirement heart... but even then, SS is set to be able to pay 77% of benefits from current taxes projected to that date (SS Press Release May 31, 2013). How could this not cause some uncertainty among folks in this generation? As mentioned, this generation also saw the freezing of the vast majority of non-government pensions during their working careers as well.

So against this backdrop there is a bit of struggle for some folks - hardly shocking. I would imagine folks in the ages of 32 to 52 would be buying their first or a trade up home just in time to get whacked by the first national decline in home prices... Not to mention the .com collapse and you've had two major market meltdowns during this generations investing lifetime. So again, uncertainty wouldn't be much of a surprise here. I'm not sure any of the information in the survey is actionable or really meaningful over the long run.

In other words, I'm not sure that there is some critical financial acumen lacking in this generation that an extended bull market would not fix ;) :beer


From the perspective of a mid-30s couple, we have been dealt multiple blows. Not only did we experience dual layoffs in the .com bust, but then, once back on our feet, bought our first home in late 2004. We only got our heads above water on that deal in 2012, enough to sell it and walk away with nothing. During the period from 2008-2012 we did everything we could to pay down our loan balance to get "right side up" again, while having babies and paying 25K per year in daycare bills (after tax, salary impact at 25% FIT, 9% SIT is closer to 30K, even considering using the FSA).

We've never taken a 401K loan, but believe me, it was HARD not to do it. Instead, we had to reduce our savings rate, because due to a 2nd round of layoffs in 2008, things got "hairy" for bit.

So to generalize Gen-Xers (and we are at the tail end I'd guess) as not trying is a bit hurtful. We are certainly trying, and fortunately, we have time on our side. Our projected retirement year is well-after 2037. We've got no pensions, and no jobs offer them. Medical insurance is $1000/mo. It's not easy. We make "great money", live frugally, and actively budget and save. Amongst our immediate friends, we are saving the most money. I have no idea how this speaks for our generation's future, but it isn't looking pretty. Just to do a straight 70% salary replacement, I've got to save 22%, and that is if the market does well over 30 years. I've got a half-million dollar in future college costs (or more) to contend with too.

Our parents are barely retired, and barely making it. The squeeze will most certainly be on in our late 40s / 50s / 60s. Even though we are saving 20%, we may just be eating Alpo. That is what is scary. But that is why some of us are HERE.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Curlyq » Mon Jun 24, 2013 7:22 pm

I'm a Boomer/Gen X cusper. My parents were "Matures" and taught me lessons from living through the depression. X'ers are a generation away from this knowledge. This might be one difference, although I've met plenty of Boomer's who were "drunk on credit" just like everyone else and have paid the consequences since then.

Additionally, what either didn't exist or came into the market as a special use item, are now considered must haves and these items (including technology and designer goods) have much more impact on one's budget than earlier generations had.

I think that this whole marketing of high-end goods to the public has been very effective. When you consider that some media outlets are following Kim Kardashian and Kayne West and their purchases and touting them as "American Royalty," then you have an idea of where we are at as a nation.

If anything, being a saver, this economic downturn has been somewhat punishing as interest rates have dropped and save options for savings are fewer and far in between. Sometimes I think that those who were/are "drunk on credit" are having a pretty good time, while some of us savers continue to defer spending for safer waters.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby inbox788 » Mon Jun 24, 2013 9:19 pm

jlawrence01 wrote:I had a co-worker who had a $6 a day coffee and donut habit. So what about $6? Except that the $6 x 200 days a year equated to $1,200 which represents about 2% of the individual's GROSS pay. That was money that could have been places in a 401(k) which he did not have the money to contribute to. "SMALL" habits, when done daily, become the "big stuff".

What about that 2 pack a day habit? Besides the direct cost of cigarettes, there's the additional impact on a person's health, as well as health and life insurance costs. Fortunately, the smoking rate is half that of a couple of generations ago. Obesity is today's scourge, and that daily donut doesn't help.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Epsilon Delta » Tue Jun 25, 2013 12:08 am

There's nothing inherently wrong with using a 401(k) or a IRA for short term goals. A lot of people confound two different things:
  • The amount you are allowed to contribute to tax advantaged accounts. Approaching 50% of income for many middle class couples.
  • The amount you need to save towards retirement. 25% of earnings should do nicely for reasonable assumptions.

For a person in this position it makes good sense to use the tax advantaged space in excess of retirement needs to get a small tax advantage for short term savings/emergency fund, possibly pick up an extra match or the savers credit and set yourself up for a better retirement if you have good luck (no emergency or an unplanned for windfall.)
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Easy Rhino » Tue Jun 25, 2013 12:53 am

the article seemed to define gen x as an unusually broad age range.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby nedsaid » Tue Jun 25, 2013 1:12 am

The little things you do each day really do add up. I wouldn't discount the latte factor.

If you stop at Starbucks and get a fancy coffee, you wind up getting a roll or croissant. By the time you get out of there, it can be $7-$8. So that can easily be $150 per month if this is a regular habit.

Or buying lunch at the cafeteria at work every day instead of brownbagging it.

Driving the car to work instead of taking public transportation. Gas and parking. This can be really expensive.

People dribble away lots of money every month sometimes unaware of how much their little habits cost them.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby englishgirl » Tue Jun 25, 2013 9:36 am

nedsaid wrote:The little things you do each day really do add up. I wouldn't discount the latte factor.
...
Driving the car to work instead of taking public transportation. Gas and parking. This can be really expensive.


That depends on where you live. It's actually a lot more expensive for me to take the bus to work than drive my car. With free parking and a Prius, I figured out gas would have to be $12+ a gallon to make the bus financially worthwhile. Now, if I could get rid of the car entirely and do without all the insurance costs as well, that'd save a ton, but I'm not quite there yet.

Anyway. Sorry, off topic.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Luke Duke » Tue Jun 25, 2013 10:15 am

ladders11 wrote:Honestly when you have employer matching funds, the 401k can be considered "optional salary" where you need to elect how much of your employer's money you're going to take.

Especially when you have a wide option (2-30% of gross pay 66% matched), it is tempting to have this 401k invest into a money market, in order to protect this income like anyone would protect their paycheck, and use it like a bank account, because you're redirecting money from your bank account into the 401k just to get the match.

Let's say you need 80% of your income and want to save 20% - you would want to choose the 30% savings in order to get a 20% match bonus, and then borrow the other 10%.

Rationally, some of my paycheck should go towards retirement, some towards monthly expenses, and some towards short term savings goals (car purchase, travel, insurance, property taxes, christmas shopping, etc) - so there's always a need for savings that is not retirement. What makes sense is to take as much of the employer dollars as possible and then find a workaround to use it to deal with the other savings needs.

In no way would I agree with the "still doesn't get it" assertion. Savings rates are minimal; credit is easy; real estate has gone badly; tuition is a hardship. People respond to the incentives they're given and deal with the circumstances they fall into.


Please tell me where I can find a company that provides a 401(k) that will match up to 20% of my gross pay.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby MP173 » Wed Jun 26, 2013 11:33 am

Pension plans work only if employee stays with the same job for a number of years. That doesn't occur often these days.

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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby MnD » Wed Jun 26, 2013 11:55 am

There's never been a generation that collectively was well prepared for retirement.
Private pensions have always been uncommon.
And while they now extremely rare, more people percentage-wise work for state/local govt's that do still offer them, which offset a fair amount of the decline in private plans.

Baby-boomers are grossly unprepared for retirement (age 55-64 households have a median $68k in financial net worth).
But that's nothing new or unique about them.
Gen X will be "same old same old" in this regard.
And within every generation there will be individual exceptions to the rule of not saving nearly enough.

I'm really glad in a way that most people forget to save for retirement.
Imagine if everybody saved one or multiple millions, plus social security plus XX% had a DB pension. I doubt I could afford even a tiny fraction of what I plan to do in retirement.
You would have 10's of millions of well off retirees chasing a very limited pool of resources for housing, recreation, travel, entertainment etc.
The retired household with $60K in investment net worth is not going to be booking the last oceanfront room at the Hilton ahead of you.
Last edited by MnD on Wed Jun 26, 2013 12:26 pm, edited 1 time in total.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby pingo » Wed Jun 26, 2013 12:18 pm

Marmot wrote:Bogel was right about how the 401K is viewed as a thrift account.


Perhaps I'm splitting hairs, and it's certainly not the point of this thread, but I recall Mr. Bogle saying that a 401k is a thrift savings plan, but it is being relied upon or treated as a retirement account, too. I understood that the problem lies there.

You have retirement plans, thrift plans and social security. One does not get to borrow from a retirement plan or social security, but can do so from a thrift savings plan. When one doesn't have a retirement plan, or when one's retirement plan is a thrift savings plan, the access to the moneys for personal and often legitimate reasons (which he didn't seem to have a problem with in the video I watched) becomes a problem because that is a greater risk to one's retirement.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby MnD » Wed Jun 26, 2013 1:19 pm

My observation is that the most financially astute employees (often with equally financially successful and astute spouses) take the greatest advantage of workplace 401-K accounts. Conversely, the least financially capable employees (more often single or with financially non-astute spouses) make poor decisions as far as what to invest in, how much to put in and in taking out loans.

So as far as a vehicle to provide financial retirement security to all employees and especially to those who vitally need that, I would give a 401-K approach a C- or maybe a D+.
If an employer does not offer a DB plan, there should be some sort of mandatory minimum contribution and employees should not be able to take out loans or withdrawals prior to retirement, perhaps with some sort of extreme exceptions like terminal illness.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby mamarachel » Wed Jun 26, 2013 4:06 pm

MnD wrote:The retired household with $60K in investment net worth is not going to be booking the last oceanfront room at the Hilton ahead of you.


They are probably booking it now though, in their 30s/40s :o Don't get me wrong, I totally agree, but I'm just putting it out there that the choice is oft now or later, and people have an innate immaturity to delay gratification. Fear is part of it (small I think). More often the root is aggressive entitlement marketing and susceptibility to that. You are just as likely to be priced out of your desired retirement "thing" by a non-saving, living-in-the-moment younger person. The only place you are probably totally correct are those that are not popular among younger folks.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Epsilon Delta » Wed Jun 26, 2013 11:03 pm

MnD wrote:I'm really glad in a way that most people forget to save for retirement.
Imagine if everybody saved one or multiple millions, plus social security plus XX% had a DB pension. I doubt I could afford even a tiny fraction of what I plan to do in retirement.
You would have 10's of millions of well off retirees chasing a very limited pool of resources for housing, recreation, travel, entertainment etc.
The retired household with $60K in investment net worth is not going to be booking the last oceanfront room at the Hilton ahead of you.

If everybody had saved enough for retirement you would have been able to get a better deal on goods and services during your working life, and of course you'd have less competition from the next generation. So this rather dark view doesn't hold too much water. It's not a zero sum game, unless you choose schadenfreude as your main emotion.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby nedsaid » Thu Jun 27, 2013 1:06 am

On the costs of commuting, you have to figure in the total costs of operating a vehicle. For a new car, it costs about 55 cents a mile to operate. Gas, depreciation, insurance, wear and tear, maintenance, etc. etc. One thing to consider is the stuff you put up with riding mass transit. So maybe the extra cost of driving in is worth it to some people.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby z3r0c00l » Thu Jun 27, 2013 7:26 am

nedsaid wrote:On the costs of commuting, you have to figure in the total costs of operating a vehicle. For a new car, it costs about 55 cents a mile to operate. Gas, depreciation, insurance, wear and tear, maintenance, etc. etc. One thing to consider is the stuff you put up with riding mass transit. So maybe the extra cost of driving in is worth it to some people.


I assume this calculation includes the cost of buying the car in the first place? That works out to what, 3,000 a year? Unlimited annual bus pass near me runs $1368. Not sure how buying and fueling a nice car, prius, could cost less than that. Buying a $2,500 used car perhaps...
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Default User BR » Thu Jun 27, 2013 1:46 pm

z3r0c00l wrote:I assume this calculation includes the cost of buying the car in the first place? That works out to what, 3,000 a year? Unlimited annual bus pass near me runs $1368. Not sure how buying and fueling a nice car, prius, could cost less than that. Buying a $2,500 used car perhaps...

If you have convenient public transportation, then it's something to consider. In my case, a bus ride to work takes about one hour (according to Google Maps) while personal vehicle is about 15 minutes. Of course, in my case cost to operate is pretty negligible in almost all circumstances, as it's only 6.5 miles each way.


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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Bungo » Thu Jun 27, 2013 2:34 pm

I am apparently middle-of-the-pack Gen X (age 44), and while I could certainly save more than I do, I think I'm on track for retirement. No debt other than mortgage since paying off my student loans in the mid '90s. I would never consider borrowing from a 401(k) account - it seems too risky that I might lose my job or want to change jobs, and then it's either repay in full immediately or it gets treated as a withdrawal with penalty. If I had a cash crunch and needed a loan, I would probably prefer a home equity loan.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby Dutch » Thu Jun 27, 2013 3:24 pm

Strange definition in the article.

Generation X is most commonly defined as anyone born between 1965 and 1980.

Sorry to burst anyone's bubble :P
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby bungalow10 » Thu Jun 27, 2013 5:01 pm

Dutch wrote:Strange definition in the article.

Generation X is most commonly defined as anyone born between 1965 and 1980.

Sorry to burst anyone's bubble :P


The article isn't that far off... they have 1961 to 1980, roughly. It's not like these things are set in stone everywhere. I was born in 1978 and I've been defined as a Millennial before.

32 to 52 years of age
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby inbox788 » Thu Jun 27, 2013 7:27 pm

Texas hold em71 wrote:Well, at least they have stopped calling us slackers.

I really dislike any article that describes a whole generation of people in one broad swath. I know plenty of Gen Xers who are financially secure and headed towards retirement. I know plenty of Boomers who are not. Some of those Boomers at least have a DB pension to fall back on and are reasonably assured of Social Security being there.


I never identified myself with any particular generation. Didn't realize that until now, you're taking about me and my generation. Got to tell you, what is being stereotyped here isn't anything like me or most folks I know.

There may be a margin effect, similar to car preferences by sex. The VW Beetle is consider a chick car, and tops this list of female drivers, but if you look at the percentage, it's only 50%! The top 10 female preferred cars ranges from 46-50%, which is nearly 1:1. The male preferred cars ranges 67-76%, or roughly 2:1 to 3:1. There are plenty of folks driving cars that may be perceived as preferred by the opposite sex.

http://articles.latimes.com/2013/feb/13 ... x-20130212

So while these stereotypes of Gen X (and baby boomers and Gen Y, etc.) abound, there are plenty of regular folks who go about their business. So we may be talking about 5, 10 or 20% difference between generations, but not entire generations.

From http://www.cnbc.com/id/100834761

Gen X was hit with a severe recession in their prime wealth-building years
- true
From 2007 to 2010, a recent Pew study found, Gen-Xers lost 45 percent of their net worth – about $33,000 on average.
- maybe, but look out 1 year out each way from 2006 thru 2011, and those who remained invested in the market pretty much broke even. Those that rebalanced from bonds gained as did those that continue to invest through the trough (DCA). Arguably, the baby boom generation took the greatest hit, since they had more in investments and are closer to retirement (or recently retired), so less time to adjust.
They are, in a word, strapped. Half of Gen Xers have difficulty meeting their expenses each month, compared to less than a third of Boomers and Millennials. Some 58 percent carry balances on their credit cards, 16 percentage points higher than Boomers.
- half = 50%, a third = 33%. 58-16=42%. So while Gen X'ers are worse off than boomers, I see more similarities than differences. So 2 generations post Social Security (1935) and 1 generation post Medicare (1965). Not making any sort of statement, just an observation.

Worse than investments, housing prices took a greater hit and have yet to fully recover for many. Still there's room to be optomistic as this data only goes out thru 2010 and doesn't update the 3 years of improvements in the economy, markets and housing.
http://www.ssa.gov/policy/docs/ssb/v72n4/v72n4p47.html
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby sesq » Fri Jun 28, 2013 12:12 pm

I don't like holding 1% cash and I have used the 401(k) loan for short term liquidity from time to time. The times I have used it I knew that a cash windfall was coming shortly and the fees/interest were very minimal. Its not a taboo for me.

Even with 1% real returns I have already saved enough for retirement at age 60 (I am 41). At this point I am finishing off the mortgage, 529 plans and building the FI / possible early retirement warchest.

I always hated the slacker term. The "baby bust" had some appeal in that it suggested employment prospects would be good throughout my generation's careers. Delayed retirements of boomers, technological change seems to have eroded that fantasy.
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Re: Spanked on Retirement, Gen X Still Doesn't Get It

Postby digit8 » Fri Jun 28, 2013 4:13 pm

My takeaways:
-45% of Gen X net worth from '07 to '10 averages to the princely sum of 33k?
-When an article or commentator cites the spendthrift nature of a broad social group, I'm never quite clear on what that data source is for such conclusions. I didn't have a "what's your demographic, and can you afford this?" set of questions at the counter the last time I hit Best Buy for some toys(I'd prefer such questions to the endless pushing of extended warranties, however).
-In some cases, I don't know that the choices Gen X makes have been all that radical compared to their predecessors. Despite Kent Allison's seeming shock at their foolhardiness in paying for kids college, I'm pretty sure they didn't invent the concept of supporting ones child as they prepare for a career.
-It's strikes me as at least a bit of cognitive dissonance to combine the ideas that Gen X has been 1)having a big unemployment problem 2)takes care of their parents 3)takes care of their children, add in that they are likely to have taken loans for retirement plans, and combine it all to declare they "lack discipline".
- I would be fascinated to find out why the percentage that said they couldn't save jumped 13% in 2011.
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