For many of my peers in Generation X saving for retirement seems like a wishful fantasy. This is a scary predicament for an age group that can no longer afford to wait for some other day to take real action on retirement planning.
We are the generation that may fully feel the painful brunt of the 401K self-determined retirement model, a model by most accounts that is woefully failing folks in comparison to defined benefit pension plans.
The retirement prospects for Generation X is starting to take the shape of a significant crisis. A crisis that is slowly taking root before everyone’s eyes, yet no one seems to be sounding the panic alarm. Instead, I see friends defeatedly burying their head in the sand, resigned to retirement failure and too paralyzed to take a step.
As dangerous as inaction, others are punting on the process until their ideal day arrives when all their financial stars will align to finally allow the process of saving to begin in earnest. I state these observations out of compassion and frankly worry for my peers, and not in the least to be critical or judgmental.
I personally am woefully behind on anything that can even be looked at as a respectable start for a retirement fund. I make this admission to clearly state I am right there with my peers who may be limping towards retirement. I am flat out scared of what retirement will look like for all of us in Generation X.
What are the forces at play that not only have Generation X drastically behind on funding our retirements but also burying the potential peril far away from our collective conscience? The threat of an underfunded retirement for massive swaths of an entire generation is imminent, but there seems to be no outcry.
Where is the desperate drive towards frank conversation at least, if not prudent action? I think there are a few things at play here contributing to this malaise, from both external and internal sources. The factors that seem to be creating this climate of inaction are fear, debt, distrust, and lack of options.
Fear is paralyzing. When you take a concept that is future based, like the ability to live with dignity in old age, it tends to only compound feelings of fear. The present tense is where solutions arise, but planning and taking action for retirement requires a great deal of vision for the future.
Any time that is spent mentally roaming around in the future can easily stir emotions of fear. Fear alone can lock someone up. Fear can prevent a single step from ever being taken towards a solution. Fear is real and powerful. I am afraid of my prospects for retirement.
Debt is the ball and chain we shackle to our leg as we plunge overboard and into the abyss of hopelessness and inaction. Credit cards and student loans are the two main components of debt that are eroding hope for any assemblage of an actionable retirement plan.
The act of budgeting monthly payments to creditors with their correlating amounts of interest is debilitating financially and spiritually. It literally sucks the life force out of you and is akin to setting piles of cash on fire in your own living room.
I am personally embroiled in my second waged war with debt. The first occurred in my late twenties when I finally decided to grow up and pay down all the credit card debt that financed the extravagance of my faux-baller lifestyle from the earlier years of my twenties.
I even took the drastic step of moving back home at the age of 29 and paid my credit card debt down to a zero balance. I was so relieved and proud of that accomplishment.
All of that work and progress got unwound entirely, though, during the 2008 financial crisis when I was laid off. I admittedly did not pare down my lifestyle enough at the time, having no awareness or context for the length and breadth of the financial crisis we were about to endure.
I wound up supplementing much of my income through credit cards as I fought mightily to rebuild my career. I am now once again waging war against credit card debt.
I have stopped using cards cold for a solid 3 years now, but the debt has taken a toll on me for the second time in my life. It is indeed more painful financially and emotionally at this later stage of life when staring down retirement.
The 2008 financial crisis appears to have also left a lot of folks completely distrustful of wall street and the global economy as a whole. Wall street seems like a flimsy house of cards. Right outside are charlatans and snake oil salesman scheming and schmoozing you to come inside and entrust your entire financial worth in their hands.
Generation X lost a significant amount of wealth from the crisis and many watched their parents be forced to push off retirement as well. Many are distrustful of the institution of investing and of the supportive industries surrounding it.
Brokers seem bent on pushing products for a commission. Sure there are wealth management or advisory firms, but who in our shoes could ever afford paying a significant fixed fee, or even worse a percentage of our assets, just for advice? Distrust of the entire institution of investing feels to be at an all-time high right now.
If you are able to overcome the distrust of investing through wall street and do see a need for your money to grow and compound beyond a meek savings account rate, which I do, then where do you go? The options for getting started with a modest initial investment are limited.
Minimum requirements for an initial investment, often $1,000 or higher, are a deterring barrier right from the start for many of the personal retirement account options out there.
Employer-based retirement plans do seem to be the best possible option, if available through your work, but often times the investment options within the plan can be limited or wrought with crippling fee structures that can eat away at growth.
For all of the explanations and possible causes of why Generation X is being neglectful of planning for retirement, it seems that fear is the underlying theme amongst them all. Some form or fear is manifesting itself within the inaction, the mountain of debt, the distrust, and even the lack of options available to us.
Regardless if you relate to all of these reasons or just identify slightly with one, a singular action step is needed from you right now. Not a multi-step, comprehensive, tackle the world solution. Just a singular step.
Action kills fear. It does so immediately. Whatever you are most afraid of, take a singular action towards that fear and it will vanish.
If you are afraid it is too late in the game or you do not have enough funds to get started, jar yourself into a singular action. From all the research and inquiries I made online for opening up a personal retirement account, Charles Schwab seemed to have the lowest barrier for getting started with their minimal and recurring investment requirements.
At a quick glance of their current requirements, it looks like a $1,000 minimal investment requirement can be waived entirely if you commit to a $100 monthly auto-transfer into your retirement account.
I only had about $200 I could initially set aside to start saving and investing for retirement. I admittedly felt financially inadequate and silly for bringing such a low amount to start at Charles Schwab. Inadequacy and embarrassment are all emotions steeped in fear. I was afraid.
The customer service team at Charles Schwab helped alleviate my angst immediately and made it easy to establish a Roth IRA. Their reps talked to me as if my account was getting started with a $200,000 deposit. They were incredibly helpful and responsive.
There was also a significant amount of investment options available within my new Roth IRA that have no recurring management fees or commissions charged when purchased. Building out a retirement account with these types of investment options can help give yourself the best chance for long-term growth.
If you have a distrust of the process then I suggest you read a book today. Your action step needs to be centered around self-education. No, you most likely will not learn the fine intricacies of markets, exotic investment tools, or become an options trader. You can, however, demystify the institution of investing and gain a broad sense of how and why you should be funding your retirement.
The Only Investment Guide You’ll Ever Need by Andrew Tobias is a brilliant place to start your self-education. He gives a no frills, common man’s approach to personal finance that is simple, yet comprehensive.
Read this book. Do not allow planning for retirement to be thought of as some complex riddle, meant to be solved only by wealthy, ivy-league aristocrats.
You can and should learn the big picture concepts of saving and investing for retirement. Even if you plan to use an advisor some day, you need to be an active participant in the process.
If you have a program offered through your employer and you are not enrolled then you need to correct that immediately. That is the fastest and most actionable step you can take. Whether you are not enrolled yet or already participating, you are best advised to become familiar with the offerings within the plan.
Make sure you are set up with the best possible mix of investments for diversity and minimal fee structures. The decisions you make for where your money goes in your 401K will make a dramatic impact on your ability to play catch up in amassing wealth. Fees and poor investment choices can sabotage your best-intended efforts.
There are some pretty powerful and free tools available online to run an audit on your investments and improve performance within your plan. Do not just fly blindly with your 401K. Know where your money is going and understand why it makes sense to stay there.
If you have a mountain of credit card debt then your action step can be creating a spending plan on a spreadsheet. List out every single expense you foresee in a pay period, prior to receiving the pay, and reconcile those expenses against your earnings. Plan how and where you will spend every single cent of that paycheck. Plan ahead for at least 3 pay periods at a time.
Do whatever you need to do to ensure you will not be spending more than you earn each pay period. For this immediate moment, it will be a massive victory for you to just balance out your expenses versus your earnings. Get your spending plan reconciled so you know a credit card will not be used at all over this timeframe.
If need be, take a long hard look at your expenses and make changes to reduce them. Get competitive car insurance quotes, reduce your cable bill, shop smarter for groceries with coupons, or pack lunches for work each day.
If you are staring down thousands of dollars of debt, your first step towards attacking retirement is a spending plan to ensure you stop creating more debt. Focus only on this first step. Eliminating credit card usage is a real step towards dignity in retirement.
Just about any financial planner or accountant would tell you that saving and investing for retirement while having any amount of credit card debt still owed to creditors is wasteful. They would point to the interest you owe as directly negating any earnings or gains from the retirement investments. It is simple math that supports this.
Dave Ramsey is a wildly popular personal finance persona and he is resolute in this belief. He does not believe a single penny should be put into retirement savings prior to all credit card debt being paid down entirely.
Dave goes even further and suggests all debt, with the lone exception of a mortgage, should be paid to zero prior to saving and investing for retirement. So credit cards, student loans, and even auto loans should be completely eradicated prior to tackling retirement per Dave’s financial tenets.
He believes that any attempt to fund retirement while having debt only serves to dilute your retirement efforts and protract your entanglement with the debt.
By putting the weight of all your might into paying debt first, and then moving that entire focus towards funding retirement next, you give each process the proper ferocity of action they deserve.
I did not do this at the start when I committed to reshaping my personal finances. I created my spending plan and allotted dollar amounts for both paying down debt and funding retirement. I also have an open auto loan and some student loan debt remaining in my family.
I do agree that my progress has been plodding and incremental due to trying to both save and pay debt, but I have made real progress and the actions are compounding a positive energy towards my finances.
The feeling you get from paying yourself first through savings and investments is incredible. It has little to do with the actual amounts you are setting aside but more so the actions themselves. Just that feeling and the energy you create, by taking actionable steps, provides an entirely new outlook on your prospects for the future.
All that being said, I do see the wisdom and value behind fully eliminating nagging debt prior to funding your retirement.
There is no magical solution that will be appearing out of the sky one day to save everyone from their retirement woes. The government is absolutely not to be viewed or trusted as a resource for salvaging your supposed golden years.
It is solely and strictly on you and no one else to get this figured out. The time was yesterday to do so. While that may seem daunting, just breathe and take a singular step. Do not get frozen by trying to figure out the entirety of your plan and solution, just focus on the very first thing you need to do.
Whether that is to read a book, opt into your employer’s 401K plan, or create your spending plan to stop accumulating debt, just take a singular step towards a plan for retirement.
I will never propose or offer up actual funds or stocks for you to invest in. That would be reckless on my part and I am nowhere near qualified or educated enough to do so.
My two main goals are to create the conversation about retirement planning amongst my peer group and to spur everyone on to take a singular step of action. You deserve the best possible chance you can provide yourself in later life. Please take your step today.
****I have absolutely no relationship with Charles Schwab and their retirement and brokerage services. They have no idea I am writing this article. I only mentioned them because of my positive personal experience with them as their customer and their lower initial investment requirements compared to most other firms out there that I had researched.