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Gen Xers Are Falling Behind Financially

(From Credit Union Times) – Much has been written about the how millennials today are slower to marry and buy homes than young people of the same age in previous generations, but they are not alone. Their Gen X elders have also fallen behind in the markers for economic maturity.

According to a new report from the Employee Benefit Research Institute (EBRI), Gen X households — called the “sandwich generation” because they’re caught between paying for college, caring for their parents, and saving for their own retirement — are also less likely to own a home than prior generations of the same age, 40 to 51.

Slightly more than 65% of families headed by a Gen Xer owned their home in 2016, down from just over 75% and nearly 72% in 2004 and 1992, respectively, according to EBRI.

Similar differences were seen for the percentages of Gen-X-led families having any type of  retirement plan: 67% in 2016 versus roughly 72% and 73% in 2004 and 1992.

Gen-X-led families in 2016 also had higher debt-to-asset ratios — 34% in 2016 compared with 30% and 22% in 2004 and 1992, respectively, and, most important, a lower median family net worth: $103,130 versus roughly $152,000 and $108,000 in 2004 and 1992, respectively, in 2016 dollars.

Not surprisingly, the percentages of families owning homes or having any type of retirement plan were greatest for those families with incomes in the highest quartile and lowest for those with incomes in the lowest quartile.

The poorest Gen Xers by income were the driving force for the overall weaker financial indicators of Gen X families, though the debt-to-asset level was greatest for those families with incomes in the second lowest quartile rather than the lowest — over 40% for 2004 and 2016, according to EBRI. Families with minority heads of household and without bachelor’s degrees also fared worse, after 2004.

The one area where today’s Gen-X-led families appear to be better offer than their cohorts in previous generations was in individual retirement plans — defined contribution plans and IRA accounts. Just over 60% of Gen-X-led families owned an individual retirement plan in 2016, up from almost 59% in 2004 and 51.5% in 1992.

Also, their median balances in these plans in 2016 were far greater than those in 2004 (just over $43,000) and 1992 (nearly $27,500), in constant 2016 dollars.

The report concludes with the challenge facing Gen Xers: They are “closing in on retirement at a time when they are facing many financial challenges” despite the fact that they are the first generation to have access to defined contribution plans in the private sector for the entirety of their careers. Building up assets in those retirement plans “could be affecting other aspects of their finances,” according to the report. “How this generation uses its remaining years of working will tell the tale of their financial success in retirement.”