While one would expect baby boomers, as the older generation of the workforce, to have been more affected by the COVID-19 pandemic in terms of layoffs, time off and pay cuts, surveys have found the next generation baby boomers, Generation X – or roughly those aged 41 to 56 – have been hit hardest. Millennials and young adults have been the hardest hit by job disruptions.
According to a report by Greenwald Research and the Society of Actuaries, “Financial Perspectives on Aging and Retirement Across Generations,” 33% of Gen Xers were made redundant or subjected to a pay cut during the pandemic. This was also true for 40% of Millennials, but only 21% of Baby Boomers.
In addition, the report says: “Since the start of the pandemic, two in ten [Gen Xers] have experienced changes in their living situation, with a change of housing being more frequent among the youngest. Debt makes finances harder for 35% of Gen X, more than the rates of the Baby Boomers and the Silent Generation. (The Silent Generation is the demographic that precedes the Baby Boomers, roughly those born between 1928 and 1945.)
Based on the results of the challenges Gen Xers face, the National CPA Financial Literacy Commission of the American Institute of Certified Public Accountants (AICPA) recommends three steps Gen Xers can take to begin easing financial stress. The first is to embrace the idea that if markets go down in the short term, they also go up in the long term. Building a solid financial plan, with the help of an advisor or maybe a digital financial planning service, can help Gen X manage this anxiety.
The second thing the AICPA recommends is to take an honest inventory of your finances, including spending habits, debt levels, interest rates paid on each type of debt, credit reports and scores, and cash flow. It can help a person see more clearly where they can cut spending and increase their savings.
Third, the AICPA says it helps to set up automatic savings plans and use modern financial tools and applications.
Generation X is now decidedly the “sandwich generation,” says Edward Chairvolotti, CEO of Chairvolotti Financial in Winter Park, Florida. “They take care of their children and, in many cases, their parents. Life is busy for them, and it is unfortunate that many mistakenly consider retirement to be in the distant future. “
Ryan McPherson, director of coaching and financial education at SmartPath in Atlanta, agrees Gen X is “sandwiched” by competing financial priorities.
“For years, Generation X has led the great financial balancing act,” he says. “They care for aging parents while managing their own financial goals and challenges. COVID-19 has not made things easier. “
Dan Keady, chief financial planning strategist at TIAA, agrees with Chairvolotti that even before the pandemic Gen Xers were torn between the needs of their children and their parents. On top of that, he points out, many Gen Xers are struggling with student loan debt.
One of the most effective ways for a retirement advisor to help members of this generation is to help them take a break and take stock of their financial health and show them their retirement income projections. , Keady said.
“According to our own survey data, only 40% of employees do financial planning that goes beyond a year into the future,” he notes. “What I’ve seen in our surveys, and as a practitioner, is that once a person gets their retirement income projection, they can see if they’re on the right track. Most retirement planning tools can then show them that if they invested just a little more, their prospects would be even better. Between the ages of 41 and 56, you still have time to make small changes that could really make your money’s worth.
It’s also important for advisers to realize that during pandemic shutdowns when people were staying at home, many weren’t spending as much money, so Gen X might be able to perpetuate the saving habits they’ve had. ‘they’ve learned over the past year and a half, Keady points out.
“It’s important for counselors to help Gen Xers get started, especially if they had to cut their savings because they were made redundant. We used to call it “finding parts in your couch,” he says. “Advisors can also remind people of the incredible value of carrying enough money back into their retirement plan to match their employer. Another tool that many people don’t know about at work is the health savings account. [HSA] that may be available to them. Access to an HSA could dramatically increase their tax-free savings.