Gimme Some Truth

May 04, 2020
By Kristan L. Anderson, CEBS, CFP®

Back in August 2016, I wrote an article in this newsletter about Generation X, my generation. The gist of the article was that, while we were largely considered a forgotten generation, we had plenty of opportunity to get the retirement planning thing right. In our lifetimes, we have suffered through a lot of once in a generation world events and various health crises. As the first generation of latchkey kids, the primary rule of this current crisis, stay at home, is right up our alley. But how are we faring with retirement preparedness?

A 2019 Schwab study suggests that a good percentage of Generation X is still focused on paying off debt, versus saving for retirement. This debt is a result of credit card spending beyond our means, unexpected home repairs, and college tuition for our kids. Savings consist primarily of 401(k) and other qualified retirement plans. While Generation X does a good job of putting money into these plans, it is clear that there isn’t much left over for any additional savings.

Speaking for myself, retirement still seems like a distant dream that consists of having the time to learn new things and just breathe. But I’ve met with plenty of clients my age and younger who want to retire early while maintaining a lifestyle that consists of a large home (sometimes two), expensive vacations and extensive support of children and grandchildren. I feel like my dream is a little more pragmatic than some of the scenarios I’ve worked with in the past.

I’m not judging here. It is my job to help people meet their goals, or help them realign their goals with their resources. But I am wondering how all of this sheltering-in-place is making people reassess their current choices. By spending a lot more time at home, do you find that you use certain parts of your home way more than others? Maybe downsizing in retirement doesn’t have to be so daunting. Not being able to go anywhere, do you find that having one or more cars per family member is a bit excessive? We should all have more money to put toward savings, not having to buy as much gas, or pay for parking. And how are our kids faring? This isn’t only a financial question anymore. My daughter is missing out on her senior year of high school and I fear that she may not be able to go away to college in the fall. I’m less concerned about being able to afford college than I am about her morale and ability to learn and grow in the future. If our children are not in essential industries, they may be out of work and unable to make their rent payments. But how do we continue to support them, while struggling to walk our own paths?

Take advantage of the time and insights you now have. Now may be a good time to evaluate where you are and where you want to be. Evaluate your budget and set some reasonable goals. Really, if we can all survive sheltering in place, working from home, or surviving on one income, then the budget thing when we get back to full employment should be a piece of cake. Focus on savings, more than spending. We are more likely to spend up to (and beyond) our available income. So, first carve out a good level of savings, and not just in retirement vehicles, and then figure out what you can afford beyond your fixed costs. Give yourself the ability to spend on something indulgent, just keep the dollar amount to less than 10% of your biweekly income. As you are going through this exercise, consider what elements of how you are living now, largely confined to your home, give you the most comfort and joy. Yes, I said it, joy.

While much of this article can apply to clients of every generation, I am specifically calling out my Gen X people. We are the ones that are stuck in the middle – at times supporting both our kids and our parents. If anyone needs to get this right, we do. So, ask for help and use all of the resources available to you. Figure out a reasonable retirement plan with the help of some long-term projections. And start prioritizing your future goals, over your immediate desires.

Meet Kristan L. Anderson, CEBS, CFP®»

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To view other articles in the May 2020 Financial Planning Focus newsletter, click here.

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