Generation X, we are often recognized for our refusal to fit into predefined molds and were shaped by a unique historical period. As latchkey kids, we were often reared in dual-income or single-parent households, cultivating independence and flexibility. As witnesses to the 1970s inflation, oil crises, and the opulence of the 80s, we emerged into the workforce just as the economy was on the downturn. Yet, our youthful exposure to shows like Sesame Street and Mr. Rogers fostered values of individuality, and our counter-cultural tendencies redefined fashion and music. So where does our unique generation stand now, particularly regarding finances?
Wealth and Debt: Two Sides of the Same Coin
As of 2020, Gen Xers reportedly earned the highest average household income in America, amounting to $113,445, a substantial leap over the next closest generation – millennials at $84,975. However, this generation also holds the record for the highest debt. (1) As college costs rose, and interest rates maintained high levels, Gen Xers were the first to grapple with the significant burdens of student debt and economic uncertainties.
The Latchkey to Sandwich Transition
Currently, many Gen Xers are at a financial crossroads. As they enjoy peak earning years and watch their children mature, they simultaneously face the reality of supporting their aging parents. The Pew Research Center reports that nearly half of adults in their 40s and 50s have an older parent and either a young or financially dependent adult child. Approximately 15% of these middle-aged adults provide financial support to both generations.
However, Gen Xers are not succumbing to despair. According to the same Pew survey, a combined total of 83% of them reported being very happy or pretty happy with their lives, similar to other generations.
Financial Objectives of Gen X
In their prime earning years, Gen Xers are poised to be part of a massive intergenerational wealth transfer from the baby boomers. By 2045, $84.4 trillion in wealth is expected to change hands, either to beneficiaries or charities.(2) However, managing this wealth is not as straightforward as it was for their parents. Gen Xers navigate more complex financial portfolios, often encompassing stock options, deferred compensation arrangements, and 401(k)s, in contrast to their parents’ simpler pension-based retirements.
Their current financial concerns typically include tax minimization, portfolio diversification, funding children’s education, and avoiding costly financial mistakes. While they recognize the need for professional financial planning, Gen Xers value autonomy and understanding in their financial endeavors. They prefer financial advisors who offer clear explanations, various options, and align their advice with the client’s values for investing, donating, and living a fulfilling life. Hence, they often favor fee-only fiduciary models to access financial advice.
Redefining Retirement
When envisioning retirement, 90% of Gen Xers predict that their experience will break away from traditional norms.(3) Many expect to continue working beyond the conventional retirement age, but with a difference. They envision work that offers flexibility, fulfillment, and social interaction, fulfilling a greater purpose beyond mere economic need. For Gen X, retirement is not merely a phase of relaxation, but also an opportunity to engage in meaningful activities.
The Bottom Line
Gen X, having influenced culture and societal norms for decades, is now reshaping perceptions of wealth and financial planning. Their goal is to construct a financial plan that enables them to build long-term wealth on their terms, with a focus on aligning with their individual values.
The financial world can expect to see further trends and changes as this innovative generation continues to define and redefine their financial paths.
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- Statista Research. Mean Disposable Household Income in the United States in 2020, by Generation. February 24, 2022. Statista.
- Cariaga, Vance. Gen-Xers Will Inherit $30 Trillion Dollars in the Next Two Decades. March 4, 2022. Yahoo Finance.
- 3. Khalfani-Cox, Lynnette. Five Interesting Facts About Gen X. AARP.
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