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Saving and Investing Challenges for the Sandwich Generation (X)

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November 4, 2015
Financial challenges for the sandwich generation

More Gen Xers are edging toward their 50s, and they’re worried about retirement. But they’re also worried about their parents’ retirement and their kids’ college choices and whether they have enough career momentum to finance existence as a sandwich generation.

Gen X, which includes those born between 1965 and 1980, is the first generation to experience the shift from traditional pension plans to 401(k)s and individual retirement accounts (IRAs). They’re also pretty likely to be shouldering college tuition or saving toward tuition for their kids—and they may still be feeling the weight of their own student loans. Those in their 30s and 40s have the highest average student loan debt among borrowers, according to the Federal Reserve. And Gen X is looking ahead to a day (if it’s not here already) when they may have to cushion the financial or housing needs of their baby boomer parents.

Foremost, the retirement planning shortfall is a big deal. The Center for Retirement Research at Boston College estimates that in order to maintain their lifestyle in retirement, households need about 70% of pre-retirement income, on average. Under current laws, Social Security can replace about 36% of retirees' final inflation-adjusted earnings. And to make up the difference, the center estimates savers need to set aside about 15% of their pay over the course of 30 years to retire comfortably (these are approximations; every retiree is different).

Much of the most publicized research on retirement readiness has focused on baby boomers, who are turning 65 at a rate of 10,000 a day; they’re a big demographic for sure. Then we have the millennials—aged 18 to 34—who are of great interest to retailers, moviemakers, and financial planners alike as this social media-obsessed culture launches its efforts to invest in a secure future while swimming in information on how to do it.

Gen X Feels Crunched

Not so for those Xers. A survey by TD Ameritrade this year found that Gen X is more worried about retirement savings than boomers or millennials. Notably, millennials maybe can’t yet worry about retirement planning, because the TD Ameritrade survey also found they are paying an average of $18,250 a year to financially support others in their family. That’s nearly double what boomers and Gen X are paying to support extended family.

But Gen Xers can see their own retirement deadline just a few decades away and, if the survey is any indication, they see themselves as challenged relative to other groups.

Half of Generation X (49%) think they have more financial responsibilities than their parents’ generation, and 39% feel their generation will never have as secure a financial life as their parents’ generation, according to the TD Ameritrade survey.

Financial support survey

FIGURE 1: DEBT LOAD. The TD Ameritrade survey found Gen Xers to be the more debt-laden of the three groups. Source: Head Solutions Group for TD Ameritrade. For illustrative purposes only.

Many Gen Xers likely consider it a privilege to support their boomer parents. But love alone can’t pay the bills. Supporting adult kids plus aging parents costs American family budgets $630 billion a year, and most aren’t letting their financial professional know about this burden, the survey found.

There’s Still Time

For Gen Xers, it could be particularly challenging to catch up. The Center for Retirement Research estimates that those who start saving at 45 and hope to retire at 65 will need to save a whopping 27% of their income each year.

Hopeless? No way. The Center for Retirement Research also estimates that savings targets drop to 10% if the worker aged 45 can put off retirement until they're 70. Plus, there are other ways to grow your savings. Start by sitting down with a financial professional who can help. Who knows, a fellow Gen Xer may just pull up across the desk. They get it.

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