A recent study released by Pew Charitable Trusts found that people classified as “Late Boomers” and “Gen Xers” were hit particularly hard by the recession and are on track to be financially worse off when they retire than “Boomers.” Why is the next retirement generation behind and what can they do about it?
The report found that many Gen Xers and Late Boomers were already behind on their retirement savings when the recession hit. Combine that with the reality that many were suddenly unemployed and owned homes that dramatically fell in value. The result is an entire generation that fell in net worth. In fact, between 2007 and 2010, Gen Xers’ net worth decreased by 45 percent. Those three years were rough for everyone, but Boomers and Late Boomers saw a median net worth decrease of only 25 percent. Even the housing collapse hit Gen Xers harder. Home equity fell 27 percent for them, compared to only 14 percent for Boomers.
Additionally, Gen Xers are carrying more debt, including mortgages, credit card debt and student loans, compared to their older counterparts. Gen Xers have a median debt level of about $80,000, compared to less than $40,000 for Boomers. As a result, many are delaying contributing to a retirement plan.
What to Do
Pew Research Manager Diana Elliott warns, “Unless this path is altered, younger Baby Boomers and Gen Xers may face a real possibility of downward mobility in their Golden Years.” Financial advisors usually recommend planning a retirement that replaces 70 to 100 percent of your pre-retirement income. However, according to the study Gen Xers are on track to only replace 50 percent of their pre-retirement income.
The key is to take action. Don’t allow apathy to sidetrack your financial future. Avoid letting other financial priorities prevent you from developing a retirement strategy. Roberts Tax Advisory understands the toll the recession has taken. Utilize our experience to help you recover and get back on track. Contact us for a practical financial strategy that fits your needs.