Thursday, May 22, 2008

Gen-X Retirement Blues

I found this recent article from USA Today regarding the retirement savings habits of Generation X very interesting.

Generation X is generally defined as those born between 1965 - 1980 and includes me and Mr. Sam.

The article warns that:

The Center for Retirement Research at Boston College has calculated that 48% of Gen Xers are at risk of being unable to maintain their standard of living in retirement, says Andrew Eschtruth, the center's communication's director. Compared with the boomers, Eschtruth adds, the Gen Xers "always have the highest at-risk scores. The changing retirement landscape is gradually becoming more challenging."

Why are we so at risk? The article notes the changing landscape of retirement savings (i.e. the shift from company sponsored pensions to 401k plans) and that Gen X is burdened "by high housing costs, stifling college debt, stagnating wages and outsize health insurance and gas prices."

Bryan Short is the 30 year old lawyer held up as a cautionary example.

At age 30, Bryan Short has, by any standard, achieved professional success since graduating from Boston College and law school at the College of William and Mary. Yet despite his job as a Washington mergers-and-acquisitions lawyer, he's nowhere near as financially secure as he expected to be by now.

He and his wife own one car and rent a 500-square-foot studio apartment. More than one-third of his take-home pay is gobbled up by repayment of college and law-school debt. Children are unaffordable right now. And retirement savings? They've barely begun.

I can relate to the Shorts. When I was 30 I still had $18,000 in student loan debt from professional school, $21,000 in a home equity loan (I had used the loan to pay off all my credit card debt run up while I was in school - ugh!), a $11,000 family loan debt, $3600 in credit card debt and I had a car payment of $366 a month. However, I had bought my first home by the
time I was 30 (with 20% down) and I was saving (according to my budget records - $184 a month went to savings) but not contributing to a 401k plan (I was not yet eligible to do so) although I had a small IRA that I occasionally contributing to.

Six years later I'm maxing out my 401k contributions (so is Mr. Sam) so I never see that money in my pay check. I also save $500 a month in regular savings (goes to our ING emergency account) in addition to our other savings goals. My student loan debt, family loan debt and car are all long paid off. My home equity loan was paid off when I sold my house and I no longer use a credit card (except for business travel or other business expenses once in a while) so I don't have credit card debt. Mr. Sam's MBA student loan debt was also paid off in January 2008 so we have no debt except for our mortgage.

But, even now the first expense we talk about cutting back on is our retirement savings.

USA Today provides a 7 item retirement savings to do list.

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