GenXers Join Older Generations On Investing Bandwagon

July 9, 2003 ( - When it comes to investing, Generation X is in line with its older relatives, as 82% are saving regularly for retirement, compared to 83% of Boomers and 76% of nonretired Matures.

In fact, the 52 million Americans born between 1967 and 1981 are markedly similar to Baby Boomers (age 37 to 54) and Matures (age 55 to 70) in their overall savings patterns and attitudes and even correlate closely in terms of values with their elders.   Nearly three-quarters (73%) of Generation Xers rank family above career, wealth and leisure, compared to 64% of Boomers and 52% of Matures. Health considerations rank second among all three segments, with 10% of GenXers, 25% of Boomers and 34% of Matures identifying “health” as most important, according to The NYLIM Generations Survey conducted by New York Life Investment Management LLC.

However, the early jump that Generation X got on the retirement saving bandwagon apparently could not have come too soon, with this generation anticipating a $2 million nest egg upon retirement, double that of Matures ($1 million) and almost twice the size of Boomers ($1.3 million). The most recent survey findings are in line with earlier reports that showed Generation Xers are savers, with more than two-thirds (69%) expecting to retire with more assets than their parents.  And a comparable 70% have savings outside their retirement fund (See  GenXers Financially Focused ).

Yet, even that may not be enough.   With a life expectancy of 89 years, a 32-year-old Generation X couple will need over $10 million to retire at 60 with the current equivalent of $100,000 in gross income. This compares with $4.4 million for a Boomer couple age 45 with a life expectancy of 83 years who expect to retire at 64, and $1.1 million for a Mature couple age 62 who have a life expectancy of 78 years and expect to retire at 67, using the same current gross income assumption of $100,000.

Planning Ahead

An earlier release of data by NYLIM showed “few GenXers are investing sufficiently – or aggressively enough – to achieve their ambitious retirement goals,” observed Beverly Moore, Managing Director, NYLIM Retail Markets . “With a life expectancy of 85 to 89, GenXers may live for as many as 30 years on their retirement income. To remain on track, they need to develop a comprehensive financial plan, which includes an overall asset allocation approach, and stay the course.”   (See  GenX Rocked By Market Losses ).

The number of GenXers with such a plan is on the wane, only one-third of the generation’s investors currently have a financial plan, but approximately 70% of those without a plan believe that they will need one in the future, a figure higher than previous years (See GenX Seeking Financial Advice). Not surprisingly, GenXers expect to develop a financial plan with the help of an investment professional. Fully half of this year’s respondents acknowledge needing “the help of professional advisors to manage investments,” up from 44% in 2002.

NYLIM points to the recent market debacle as a possible reason for the slowdown among this generation, that has seen the number of Generation Xers who are not investing jump to 11% from just 4% in 2002.  As a result, only 59% of today’s GenXers own non-retirement assets, down from 70% in the previous year.   Cited as the number one reason for the decline in investment activity is “lack of funds” (58%), followed by, “inadequate experience making financial choices” (29%) ,losing “too much money in the past 12 months” (11%)anda distrust of Wall Street (32%).

Educating the Masses

Despite the earlier parallels, the generations divide in preparing for college expenses.   After years of skyrocketing college costs, 63% of GenXers are saving for their children’s education, compared with 52% of Baby Boomers. Still, due to tuition and fee increases, one-third of Generation X investors expect college costs to be beyond reach by the time their children are ready for college, up from 26% in 2002.   By comparison 33% of Baby Boomers and 25% of Matures agree that college costs are getting out of hand.

“Tuition and fee costs have nearly doubled over the past ten years and, at the current rate of increase, will likely double again in the next ten years,” notes Moore. “Fortunately, participation in college savings accounts, such as 529 plans, has also increased at a healthy pace. To keep up with inflation, investors need to factor tuition costs into their comprehensive financial plan and invest consistently.”

Generation X though is doing what they can, with 26% investing in 529 Savings Plans, up from 18% in 2002 and more than only 12% of Baby Boomers and 6% of Matures.  

However, even though most of the younger generation plans to foot tuition bills themselves, one in five expect parents or other family members to help finance their children’s education, up from 17% in 2002. Interestingly, few family members have the same expectation, as only 7% of Boomers and 5% of Matures are concerned about saving for their grandchildren’s education.

In fact, due to market volatility decimating retirement accounts, Baby Boomers are most likely to report that their progeny headed off to higher education will need to apply for financial aid. Overall, 23% of Boomers indicate that their children/grandchildren will need to seek aid, compared with 10% of Matures and 5% of Generation X.

The study was completed in April 2003 and polled 1,529 investors with more than 500 people in each of the survey’s three demographic segments.   Qualified respondents were U.S. citizens between the ages of 22 and 70, with investable assets of at least $50,000.