Planning for Generation X

Generation X refers to the 44 to 50 million Americans born between 1965 and 1980. This cohort is significantly smaller than the baby boomer wave of roughly 76 million Americans that preceded them. This is the “birth dearth” referred to in previous columns. When the boomers move to sell their toys, vacation homes, suburban McMansions, and privately held businesses, there are less buyers coming up behind them. This phenomenon could benefit bargain-hunting Gen X’ers, and disappoint boomers.

 The leading edge of the Gen X generation turns 48 in 2013; the youngest members, 34. They are well-educated and more ethnically diverse than the boomers; over 60% attended college. The Gen X’ers are the progeny of the boomers. They grew up in two-income families as latch-key children; Ward and June Cleaver were television fantasies. They experienced rising divorce rates  and a faltering economy. Liam Pleven writing in The Wall Street Journal noted that they lost 45% of median net worth between 2007 and 2010 (“How Will Gen X Retire?”; 5/18/13)

Sociologists have described Gen X  as “independent, resourceful, and self-sufficient.” Such characteristics are a plus as they ponder retirement. Rather than retirement per se, a transition not likely to ape that of their parents or grandparents, financial independence is the better quest. The first generation to grow up with computers and technology apps, options exist that older boomers never anticipated. Gen X is flexible, embracing change and new skills. However, they want to accomplish things on their own terms,  a challenge for managers of the boomer generation!

 Politicians threaten to reduce benefits from Social Security and Medicare for those under age 50. Gen X’ers will have to work longer and save more. Wisely, they discount the impact of federal programs in their pursuit of financial independence. Full retirement age under Social Security is likely to be age 70 by the time they get there.

 A leading edge Gen X’er born in 1965, and who married at age 28 with the first child appearing two years later, has a teenager turning age 18 this year. Well-educated parents with pre-teen and teenage children are facing private school expenses with college looming. Coverdell Education Savings Accounts and 529 College Savings Plans are important savings and tax-planning tools for younger married couples. With college savings plans, as with retirement savings plans such as 401K and IRA, starting early counts, as does discipline. Don’t avoid stocks, despite the difficulties of the volatile markets. Stocks go up and down. But the global economy will grow over time and dollar-cost-averaging still works!

 Avoid high cost debt. Resolve to have your home paid for by your targeted financial independence date. Lock in today’s low 15 and 30 year rates!

 The incidence of special needs children is on the rise. Don’t put off special needs planning. Such matters involve holistic planning regarding wills, trusts, and insurance funding. Powers of attorney for assets and health care are important no matter what, but more critical for children with higher levels of need.

As a breadwinner and/or parent, insure that health, disability, life, and umbrella liability coverage matches your obligations and earning power. For healthy non-smokers, 20 and 30 year level term insurance is cheap peace of mind. Women in their 30s and 40s become widows every day due to accidents and illnesses such as heart attacks.

 The Gen X’ers turning 48 this year are likely to have parents ages 73 to 79 or older. The youngest turning 34 may have parents ranging in age from 59 to 64 plus. It is not too soon to have the conversation with parents about the challenges of aging and healthcare. For the parents of the Gen X generation reading this, initiate the conversation because, most likely, your children won’t do so.  The entire family has a stake in your well-being and how your journey to your last day will be funded. In many cases aging baby boomers in their early fifties are having to step up to the plate, diminishing their financial independence.

 In short, plan, save, start now!

 Lewis Walker is President of Walker Capital Management LLC. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA).  Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with the Walker Capital Companies. ▪ 3930 East Jones Bridge Road ▪ Suite 150 ▪ Peachtree Corners, GA 30092  ▪ 770-441-2603 ▪ lewisw@theinvestmentcoach.com