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Generation X, Retirement, and Mistakes

30 August 2012

The Financial Post recently ran an interview they did with finance guru and author of the book The Real Cost of Living, Carmen Wong Ulrich. During the interview Ulrich focused on the mistakes Generation Xers are making when it comes to their retirement. The points she makes are good, and are timely in nature, as this is a time when people, those in Generation X included, are starting to look towards those retirement years and wonder what they’re going to be like. If we continue to make these mistakes as outlined by Wong Ulrich, that future may be even dimmer than people had first thought.

So what are the mistakes Wong Ulrich says this generation of people are making?

The first, and biggest, is that they’re spending way too much money on education. With all the Occupy movements and tuition protests in Quebec, this shouldn’t surprise anyone. And the fact that the student loan debt in this country is over a trillion dollars also points to a problem.

This unfortunately, may be a mistake that’s too late to correct. Of course you can make sure that you’re fully committed to a program before entering it, and save as much as you can for tuition instead of going into debt, but this is too little too late for most Gen-Xers. The last of the generation is 30 years or older by now, and most well out of their college years. But most likely, still paying off all that debt they racked up in the meanwhile.

What might not be too late to correct is the second mistake Wong Ulrich says this generation is making – that’s not planning on helping supporting parents out. This might not mean setting aside a “parental fund,” but it does mean setting aside a reserve that is available should the need ever arise.

“Once they get older, a lot can go wrong and [older parents] can wind up being deprived,” she says.

But it’s not just the older generations Gen-Xers should keep in mind; it’s those coming after them, too – their kids.

“The biggest gift that you can give your kids is the gift of financial education,” says Wong Ulrich. “Get them books or whatever, but really talk about money and continuously educate yourself because that’s going to be our way of making life cost less.”

And she speaks directly from experience too, attributing much of her passion for financial planning to her father.

“Every time there was a recession, we’d get hit pretty drastically. We had a family pow wow when my father explained he was taking out a second mortgage,” she says.

These mistakes could end up being grave, with Generation Xers facing a harder retirement than their Baby Boomer parents.

This is because while their parents may have been looking at life spans, and savings to cover those spans, up to 80 or 85, it’s thought that the average life span of Generation Xers will be 100 years old. Even with Old Age Security being raised to 67, that’s still an average of 33 years that a person in theory will not be working yet still need an income to survive.

“Even though they have a longer timeline on the horizon toward retiremetn,” says Cathy Weatherford, president and CEO of the Insured Retirement Institute in New York, “there has been a tremendous emotional impact on their confidence in the future. What are they going to do to ensure that they have enough?”

Add to this the fact that Boomers are working longer and so, not leaving job openings for their younger counterparts; and the fact that housing costs are the highest they’ve ever been. And at a time when Gen-Xers are just entering the market.

So what is the recipe for success for those in Generation X? Really, the same as it’s been all along. This group of people need to take their current and future financial position into consideration and decide how much they need to afford for the retirement lifestyle they want. Then, they need to avoid the mistakes that so many are making; and start saving as much as possible.

Do you think there are other mistakes Gen-Xers are making in regards to their retirement? Do you think they’ll  be better or worse off than the Baby Boomers? Let us know in the comment section below or, find us on Facebook and join in our money talk!

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