It’s getting closer to retirement time for Gen X — those roughly born between the mid-1960s and early 1980s. Specifically, the first wave of Gen X was born in January 1965. Since they are currently around 59 ½, they can withdraw money now without paying a penalty from their 401(k)s and other retirement accounts. However, members of this generation face an imminent retirement crisis that poses a significant challenge.
Ultimately, this financial strain could lead to a troubling trend for the Slacker Generation: the rise of “silver squatters.”
Financial Reality Bites: A Sobering Picture
Based on the Prudential Financial survey, 55-year-olds have a median retirement savings of only $50,000. For a comfortable retirement, this amount is far below the recommended amount.
The reason? A few obstacles stand in the way of Gen X and retirement.
As a result of near-term financial needs and economic pressures, Gen Xers are having difficulty saving for the future. Research from Corebridge Financial found that two-thirds (67%) of respondents cited inflation as one of their biggest challenges, and half (51%) cited rising healthcare costs. Moreover, a majority (58%) of respondents reported higher daily living expenses and a quarter (26%) reported higher non-mortgage debt over the past three years.
In addition, after largely shifting from pensions to 401(k)s in the 1980s, this is the first generation to come of age with 401(k)s as their primary retirement vehicle. A 401(k) puts the burden on its participants to figure out how much money to save, how to invest it, and how to withdraw it in retirement. In other words, this is a do-it-yourself method that retirement expert Teresa Ghilarducci has called flimsy.
Complicating matters further? A lot of Gen Xers are caught between responsibilities for their children and aging parents, which makes them known as the “sandwich generation.”
“For the generation of families and individuals stuck in the middle of caring for (and/or providing for) both younger and older relatives, the impact and potential damage to their own personal finances are magnified,” Bankrate senior economic analyst Mark Hamrick told Fortune.
State of Love of Trust: The Impact on Families
As a result of these financial challenges, a growing number of Gen Xers are seeking assistance from their families. It is estimated that 25% of 55-year-olds expect their children to provide them with financial assistance, but many have not yet discussed the subject.
In this trend, silver squatters live with their families and rely on them financially and for housing. For example, when an adult has to move into their parents’ basement. For many, this could have major repercussions.
As an example, having elderly parents live with their adult children can strain their relationships and limit their independence. In addition, adult children may need to contribute to the parents’ living expenses or modify their housing arrangements to accommodate them.
Alternatively, elderly parents may experience feelings of dependence and loss of privacy when living with their children. In addition, maintaining social connections and participating in activities they value can be challenging.
Dissatisfied: Economic and Social Pressures
There’s more to the silver squatter phenomenon than poor planning. Other factors are inflation and pension declines.
It has also become increasingly difficult for retirees to afford their homes due to rising housing costs. Often, people are forced to sell their properties and move to cheaper alternatives, leading to multi-generational living arrangements. Furthermore, the shortage of affordable senior housing further exacerbates the problem, leaving older adults with limited choices.
But that’s not all. According to the World Economic Forum, financial literacy is a major issue across all generations in the US. In particular, around half of Gen Xers don’t have retirement plans, according to Prudential.
The uncertainty surrounding Social Security’s future adds to the anxiety, with 72% of adults worrying that Social Security will run out of funding during their lifetimes, a new survey by Nationwide Retirement Institute finds. There is also a steady decline in pensions. Gen Xers have only 25% defined benefit pensions, while “leading boomers” (born between 1946 and 1955) have 39%, and “trailing boomers” have 32%.
Don’t You Forget About Me: Retirement Strategies for Gen X
Even though things may seem grim, Gen Xers can improve their financial outlook by:
Increase financial literacy.
A great place to start in improving your financial literacy is by taking advantage of online courses and webinars focused on personal finance. Furthermore, it may be useful to read articles and books from reputable financial experts. In addition to receiving support and advice from peers, joining local finance clubs can be beneficial, such as Gen X Retired.
Boost savings.
Using budgeting apps can help you keep track of daily expenses and identify areas where you can cut costs. Another effective way to monitor expenditures is to keep a detailed financial journal. Moreover, setting up automatic transfers into savings accounts reinforces consistent saving habits.
Consider part-time work or a side hustle.
You can earn additional income without depleting your savings by working part-time. You may, however, want to consider side hustles that match your skills and interests. You can offer online tutoring in your area of expertise, freelance writing, consulting, and consulting. Aside from selling handmade crafts on platforms like Etsy and eBay, selling vintage items can also be lucrative.
Delay Social Security.
The longer you delay Social Security, the greater your monthly benefits will be, which can provide longer-term financial security. Furthermore, if you live longer than average, you can maximize the amount you receive over your lifetime. It can also make it easier for you to manage other retirement savings by preventing early withdrawals.
Open communication.
By having honest conversations with family about retirement plans, stress can be alleviated and everyone can be prepared. The first step is to schedule a family meeting specifically focused on financial planning and retirement goals. By sharing your own plans and concerns, you will encourage openness in the discussion. It may be helpful to use visual aids, such as charts and spreadsheets, to clarify your financial situation and make the discussion more engaging and understandable.
Conclusion: The Importance of Proactive Planning
The rise of Silver Squatters highlights the importance of proactive financial planning. However, it is possible for Gen Xers to work towards a more comfortable and secure retirement by taking these steps.
FAQs
What is a “silver squatter”?
The term “silver squatter” refers to a Gen X individual who cannot afford a traditional retirement lifestyle and is dependent on family or friends for housing. This phenomenon is becoming increasingly common as many Gen Xers face significant challenges in saving for retirement
Why are Gen Xers struggling to save for retirement?
There are several factors that contribute to Gen Xers’ retirement woes:
- Rising costs of living. Saving has become difficult as inflation has outpaced wage growth.
- Student loan debt. Student loans are still a major expense for Gen Xers, reducing their disposable income.
- Underfunded pension plans. Many Gen Xers are now relying solely on personal savings due to the decline of traditional pension plans.
- Economic downturns. Savings for retirement have been negatively impacted by events such as the Great Recession and COVID-19 pandemic.
How is the rise of silver squatters impacting families?
The trend of silver squatters is causing families to experience a complex dynamic. As a result, you may experience:
- Intergenerational financial strain. It is possible for adult children to face financial hardships due to the responsibility of supporting their parents.
- Emotional stress. There can be resentment and conflicts between parents and children as a result of the situation.
- Delayed life plans. It may be necessary for adult children to postpone their own life goals, such as buying a home or starting a family.
What can Gen Xers do to prepare for retirement?
Here are some strategies to help Gen Xers improve their retirement prospects:
- Utilize your retirement plan. Gen X can maximize the benefits of tax-advantaged accounts such as 401(k)s and individual retirement accounts during their peak earning years. A catch-up contribution of up to $7,500 may also be allowed in 2024 to 401(k) plans for individuals who are 50 or over.
- Consider a part-time job or side hustle. You can boost your savings or supplement your income during retirement by working part-time or starting a side business.
- Seek professional advice. It is possible to develop a personalized retirement plan with the help of a financial advisor.
- Explore housing options. If you want to reduce housing costs, you may want to downsize or rent.
- Leverage reverse mortgages. A reverse mortgage may be able to provide access to home equity, but the risks should be understood before applying.
- Communicate with family. In order to address possible housing needs and support arrangements, it is important to have open and honest conversations with family members.
How can families navigate the challenges of silver squatting?
To navigate the challenges of silver squatting, open communication, and planning are essential. Families may want to consider:
- Creating a financial plan. Identify and discuss each individual’s financial goals and situation.
- Setting boundaries. To prevent conflicts, set clear expectations and boundaries.
- Exploring alternative living arrangements. You may want to consider options such as assisted living or shared housing.
- Seeking support. Support and guidance can be obtained from family, friends, or professional counselors.
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