Gen Xs Savings for Retirement on Target
Gen Xers have long had the reputation of being lazy, misguided slackers.
When it comes to saving for retirement, however, studies show that this may be an undeserved distinction.
"In comparison to previous generations, (generation X) is doing well. They are focused on the need to save for retirement at an early age," said Paul Yakoboski, senior research fellow at the Employee Benefit Research Institute (EBRI).
"In comparison to previous generations, (generation X) is doing well. They are focused on the need to save for retirement at an early age."
Generation X are folks born between 1965 and 1976, one of the "most fiscally responsible and sophisticated (generations) in memory."
Retirement on Their Shoulders
Many gen Xers realize they're responsible for their own retirement.
A Survey by Scudder Kemper found that 71% of gen Xers regularly save some of their income. Surprisingly, that's on par with folks in older generations who presumably have higher incomes. About 76% of baby boomers (folks born between 1946 and 1964) and 72% of the World War II generation (folks born before 1933) save some of their income.
The leading reason gen Xers save is that few expect the volatile Social Security system to provide adequate retirement income. At the same time, about 16% of older baby boomers, those born between 1946 and 1953, expect Social Security to be the most important source of retirement income.
Children See, Children Learn
Another major factor behind gen Xers' outlook is their parents' experience.
Steve Hess, 36, and his wife Lisa, 32, save diligently. "My parents have money pressures. I don't want that," Hess, a firefighter, said.
Using Technology to Boost Returns
Many gen X savers are using technology to build decent nest eggs.
This group feels comfortable researching investments online, and quickly turning that research into action, said Chris Cumming, vice president of marketing at Diversified Investment Advisors.
"Ten years ago, the only way to invest was to use a stockbroker. Today, I go home, dial the Internet, look at a financial profile, click to my brokerage, and buy the shares," Cumming said.
Laura Cohn, a 30-year-old writer, provides a perfect example of one of these tech-savvy investors. When asked for her portfolio balance, she replied, "hang on, let me check it out online."
Tax-deferred Savings: Gen Xs' Best Friend
Easy and early access to tax-deferred savings plans has also helped this generation get a fast start.
Hess has been saving into his 457 plan (a defined-contribution plan for state and local government workers) since he was hired as a firefighter about 10 years ago. He and his wife, who contributes to a 401(k) plan, together have about $100,000 saved for retirement.
Cohn, on the other hand, started late in thinking consciously about saving. Her father, Buzz, set up her IRAs with bat mitzvah money, and they're now worth about $30,000. A few years ago, she dumped a little money into her then-employer's 401(k) plan.
Reality hit home this year. Cohn hit her 30s and her 60-year-old parents made the classic retirement move of putting a down payment on a place in Florida. "Turning 30 was very traumatic...I just realized it was time to do something," she said. She now contributes the maximum allowed to her 401(k) plan.
"Turning 30 was very traumatic...I just realized it was time to do something."
Laura Cohn, 30-year-old saver.
Also boosting 401(k) participation rates is the growing trend by employers to automatically enroll workers in the plans, said Olivia Mitchell, professor of insurance and risk management at the Wharton School of the University of Pennsylvania.
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