Episode 41 – Gen X: growing up without financial advice
Episode transcript:
[music intro]
Jenny
Welcome back to Fund Your Future with DRS. We’re continuing our discussion of how Gen X is preparing for retirement, and this is the generation that’s starting to get serious about prepping for the next stage of life. Today we’ve got two more DRS team members from Gen X, Sherry and Mark to talk about their experience. Welcome!
Sherry
Thank you.
Mark
Thank you. And hello.
Jenny
Thanks. So, first of all, what do you think separates Gen X from different generations? Mark, do you want to start?
Mark
Sure. You know, the interesting thing about Gen X is, first of all, it’s a wide range in the years that it covers. And so Gen X, we have some Gen X retirees and then also some if they’re on the younger end of the spectrum of Gen X, and they’re still trying to figure it out in terms of what they’re going to do, and unfortunately for some that are on the younger end of the spectrum, they feel a little bit further from retirement, not just in the years, but in the capability of being able to retire, whereas those that are a little bit longer in the tooth in Gen X – most of them have their homes, you know, possibly even paid off. They’re already retired. They were able to focus on their net worth a little bit more. And so, again, it’s a very wide range.
We’re the only group that has both retirees and a lot of active workers. You know, I mean, there are some seniors that you’ll see working part time jobs and things of that sort, but for the most part, they’re already retired.
Jenny
How about you, Sherry?
Sherry
I think that our generation also is the transition from… the boomers always had more pensions available to them. So, they knew exactly what the retirement income was going to be to be able to budget, formulate a plan. Our generation transitioned into doing the 401(k)s, with that 401(k), was trying to learn how to access that information, invest it properly, and how to figure out how that works.
Not having enough education at the beginning of our careers that if we transition to other jobs, we didn’t necessarily have the foresight or knowledge of what it meant to not roll that over into another qualified account until we were much older. We also had economic ups and downs that we experienced. And so, like Mark was saying, that transition that we have done really kind of without the knowledge base or the education built in that the later generations, like millennials, they have so many more podcasts, more information to access, to know what to do with their finances.
They also have other resources. Where, our option was to go to the library and go through a card index to look up a book or know somebody. So, there was not very much information for us to be able to expand knowledge on a lot of things.
Jenny
Yeah. Besides like reading a finance magazine. And most of those were geared towards what my generation calls the finance bros, the people that are already in finance. Yeah.
Seth
Yeah. So, it’s a really good point about the coming of age of 401(k) type plans and trying to understand how that’s going to impact you 20 or 30 years down the road, but also a lot of, questions about how much money can I take out of these accounts and when can I take money out. So that’s great.
And you both kind of already touched on this in your answers. But Sherry, we’ll start with you. And could you just share a little bit about how you think about… I think because of the age that most Gen-X folks are right now, like the competing priorities of having maybe aging parents or kids who are just kind of coming into the workforce and kind of… you hear about this, “sandwich generation” and trying to figure out how to navigate that as you yourself were kind of thinking about retirement or getting closer to retirement, if you have thoughts on that.
Sherry
So, I am part of the sandwich. When I remarried, we ended up with a total of six children. Some of them had already been moved out. One of them moved back in. We talked before they came back that they could stay in the house for free as long as they were going to college and working. If not, they had to pay rent and that was a motivation to go out.
But because the children are spread out for a larger period, we also had a grandchild move in with us for a period of time. So, we kind of built a plan on allowing them to be able to get an education or get their feet under them, but also motivation to get out by charging them rent. So, it wasn’t fun.
And then also with parenting we have a parent that’s having some memory issues. So, we’ve already started thinking about future plans on how long we may be able to live in our current home, or how we would have to adapt our home to have that person move in until it got to a point that we could not care for the individual. For other things: making sure we have the power of attorneys ready for the active accounts that we need to for that individual.
Also, making sure that we set up a certain amount of funds that we kind of you know, gathered up over a period of time and that if any of our children have a problem, we have that money set aside. The first time is a bail out, the second time is a loan, because once again, we don’t want this to be a habit on their part. But we know life happens.
So, we’ve been planning for different aspects within that realm because we know that everybody gets older, including ourselves. Health care is a great cost, which everybody knows. So, having all of these different areas that we’re looking at, taking care of the children or planning for the grandchildren and eventually if they need help, but also looking forward to the parents if they need any extra help and how long they may have before we need to help them, and planning that out paperwork wise, legally wise, because we want to make sure that we’re ready for that instead of blindsided. Yeah, and we’ve been developing relationships with doctors also, so it’s not a surprise to them.
Seth
Yeah it’s great. I like the idea of a shared family emergency fund, as you’re describing that. It’s an interesting thought, especially as you think about parents or kids. So, Mark, you have additional thoughts on that.
Mark
You know, it’s really interesting. I made the same deal with my kids. You know, first I explained to them the concept of disposable income, especially being both boys. You know, that is the target demographic for so many marketing companies is young males between a certain age that have disposable income.
So, I try to teach them all about those concepts and everything I’ve learned in my finance career in terms of the importance of savings, how to do it, you know, where to put your money, where not to put your money, what not to fall for. You know, just so they’re aware of all the different types of investment instruments that are out there and just the ones to be wary of. And same deal: if you’re saving money and going to school and or working, I won’t charge you rent.
But the moment you start spending your money on dumb stuff, I’m going to… you’re going to pay some bills. You’re going to start helping out around the house. If I see you ordering like a suit of armor for a pet monkey on eBay and you don’t even have a pet monkey, you know, but you just wanted to have it right? Ridiculous things like that. Yeah, that’s kind of the ongoing joke I have with them in terms of, you know, just an example of dumb stuff to spend your money on.
Jenny
So, you kind of touched on this a little bit before, but do you think that retirement may look different for your generation than prior generations, and how so? Mark, do you want to start?
Mark
Absolutely. I mean, in several different ways. First of all, we are on we’re in that in-between group of where Gen X, we were part of developing the technologies that are all being used now. It was during Gen X’s heyday where the internet was invented, where online tools were invented, where all of these technology pieces that we’re using now were all created and invented, and customized in a way that we can use them right? And so, but even still, some folks that are a little older on the Gen X side are not necessarily as technological as some of the other ones. And so, some have had the benefit of being able to use those things to their advantage and their benefit, and some haven’t. So, you know, getting the education for retirement has been different.
The other thing that’s different for Gen X is we saw a shift from pensions to 401(k) back to pensions and a lot of corporations, a lot of employers are getting away from 401(k) is just because for a lot of employees, unfortunately they didn’t work. And when you think about a Gen X we were the experiment. We were the 401(k) experiment.
And so again for some it worked. For some it didn’t. And so, for the ones that didn’t that it didn’t work for, they unfortunately find themselves in a really bad spot in terms of being prepared for retirement. All too often I hear with Gen X, but also with millennials, how many of them feel that and Gen Z that they’re never going to be able to retire. And that’s an unfortunate thing. Every time I hear somebody say that it hurts my heart.
Jenny
Yeah, yeah. I know, me too. Sherry, your thoughts?
Sherry
Like Mark was saying, I think that it is different because we do have that difference in the 401(k) versus the pensions, but we also have Social Security Administration rules changed. And now they’re also saying that they may not have funding by when most of us are going to actually hit 65. Or it will be reduced by what, 20% or more potentially?
So, where our parents may have relied on that, even though that doesn’t actually increase with inflation like it should. We don’t have that as the backup either, because they’re already saying right now that by 2034, Social Security is not going to be there potentially either. Or be greatly reduced, or they may make the retirement age up to age 70, depending on what the legislature type does.
So, the younger generations are already, from what I’ve heard, not considering that is even a viable option that they’re getting or going to have, where some of our generation may have been planning on that. Our generation also was probably going to be the start of more divorces than the boomer generation. Anytime there’s a divorce, there is actually less income for both parties.
But women usually have substantially more of a decrease. I know for myself, I spent 20 years as a homemaker before I started a career. So, my income, even for Social Security, has greatly reduced. And the younger generations have more working families, both members are working so they don’t have that potential. Also, as time has gone on, laws have changed.
They’re not as exactly as favorable if one party has been staying home more for whatever reason. So, you have all of these other little factors that started more with our generation in this follow down than the older generation. So those are other factors that affect our retirement, depending on how many divorces or so on and so forth have happened in our individual lives.
Mark
But I think one other big difference when it comes to retirement for Gen X versus, say, the previous generation: the previous generations were all taught, you get a good job, you stay there for 30, 40 years, you walk away with a gold watch and you ride off into the sunset with your retirement. Whereas with Gen X, we really started seeing a lot of job hopping.
And with that, some employers offered retirement programs and some did not. But even for the ones that did, if you didn’t stay there long enough, you’re never going to reap the benefits of having worked there.
Sherry
We also had a lot of like Mark was saying, the technology changed when we transitioned from pensions to 401(k). Computers started to become more available and programing and stuff. A lot of startup companies happened. And those startup companies, you worked really hard, but there was no output of benefits really, because you were investing in the company for this massive return like you would have gotten from Microsoft, for example. And a lot of the people in our generation had a lot of hope and excitement and was going gangbusters for these opportunities that may not have materialized.
Jenny
Yeah. So, I wanted to ask, as you’re preparing now for the future, what is your approach to budgeting? Sherry, you talked about being a homemaker, and then you’re probably maybe having to make a little bit more of those financial decisions now. Or maybe you were before too. Has your approach changed?
Sherry
Yeah. My approach definitely has changed. We went from a single income and then I started my career. Then I eventually remarried again. So, my approach has been save as much as possible. My advice to my son was start out doing 10% of your income automatically into what other retirement savings vehicle you have. And then as you get an increase, let’s say you get a 3%, at least have 1% increase in your savings contribution.
For me personally, I monitor my retirement account every couple of months because I have some anxiety about making sure I have enough for retirement, but I’ve got up to — this may sound crazy to some people — 20% in the regular Deferred Compensation plan and 2% in Roth, and I still don’t feel like I’m saving enough, but trying to juggle bills and make sure that things are down enough.
But we have like our savings pool for the family if they actually need something for emergencies and focusing on continuing education. So, like there are some, retirement seminars outside of our agency for more diversity and so I go to those with my husband, which just for more information, I also read other articles on pensions and investing. And I also have savings outside of with a stock type place too.
Sherry
And then read up on that. And I keep up on literature on that and occasionally a podcast, but I don’t have anything that’s like, this is the one I really love. So I look at diverse things on retirement because I love retirement, which is part of the reason I work here. But keeping an eye on the retirement and looking for the trends and paying attention to inflation and stuff is very important.
Jenny
That’s great. How about yourself, Mark? Tips for budgeting or.
Mark
I had a recent shifting in terms of budgeting and handling bills and everything else. And for my part, I actually shifted to the credit card game. I have one particular rewards card that I used to pay all of the bills that can be paid electronically, which is pretty much all of them except for the house payment. And so, by doing that, I’m automatically getting a 2% savings effectively on paying those bills.
And one of the things I learned by doing it that way is it was easier for me to see the things that are coming out every month. There’s a lot of us that have reoccurring payments that come out of our checking accounts that we don’t even realize. They just get pigeonholed in all of your transactions because you have all of your debit purchases, the checks you may write deposits, you name it.
And so, when I did that, it was a lot easier for me to say, “wait a minute, why am I paying for that subscription?” Why am I paying for… I don’t want to use particular names, but you know, some cable shows or, you know, apps. It’s like, “why am I paying for that one? We never watch that one.” It’s like I polled my family and said, “hey, what was the last time we watched that channel?” Everybody in the house was like, “oh, I didn’t know we had it.” So I canceled it. And so, it’s interesting, you know, there’s different tools for budgeting. And again, I recently shifted to doing it that way. And I wish I would have done it earlier.
But people gotta be careful. I don’t recommend that for everybody because some people it’s really easy to use that credit card, but not so easy to pay it. You know, you just got to be disciplined and committed. And also, I hate paying interest. Interest angers me, when it comes to paying interest, earning interest, I love it. So, I make sure that’s paid right away every month, you know?
Jenny
Yeah, that’s good. I always try to go through all of my transactions at least once a month just to see what’s there. And if there’s anything unexpected.
Mark
Yeah, it’s a lot easier to look at your checking account when you don’t have all those other things coming out. And same (thing) I’ve also noticed, you know, it’s been easier for me to find duplicate transactions for example. It’s like, “okay, I know I didn’t eat at that restaurant twice on the same day and happened to pay the same exact amount, you know?” So, there’s been some random, transactions like that too, that I’ve noticed that I may not have noticed otherwise.
Seth
So, I think our last question for these episodes is just if you have any advice for younger people who are thinking about retirement or finances in general. Mark, we’ll start with you.
Mark
Yeah, absolutely. And, you know, somehow I find myself on a regular basis, talking to younger people about retirement. And I always tell them the same thing because so many of them say, you know, “Mark, I don’t think I’m ever going to be able to get to retire.” First of all, I tell them, “don’t ever say that to yourself again.”
Believe in yourself, believe you can do it. Make it a goal and then detail out the steps that you’re going to need to get there. First and foremost, you’re very young, so start saving money. Even if you can’t save a lot, any amount that you save later on in the future, you’re going to be glad you did. And I also tell them about…
It’s interesting, one of the things you’ll notice, and in anything like whether it’s your DCP account your retirement account, your 401(k), is it feels like it takes forever for it to get to like a significant amount. And then it reaches this point where all of a sudden it feels like a snowball, you know, just rolling down the hill and it’s like, “whoa, wait a minute.”
It took you forever to get to like, say $5,000 and then $10,000, but then from 10,000 to 12,000, it’s like, “wait a minute, that was, felt like it was just a year ago or six months ago.” And then you get to 20,000 before you know it, and then you’ve got a whole lot more than you ever thought you would have.
But again, main thing is I encourage them to believe in themselves and just make it happen for yourself. Start saving money. It’s never too late. And I say that to your fellow Gen Xers too. That just didn’t plan on retirement or never really addressed it. It’s never too late to start saving some money. You’re going to be glad you did.
Jenny
I love what you’re talking about. How, once you get to a certain amount, then it feels like that snowball. And part of that is compounding interest and part of its time. You know, if you’re making 6% on $200, it’s a lot more if you’re making 6% on $5,000.
Mark
Exactly. And, you know, and you’re going to see some losses and some gains. But one of the things I tell people all the time when the market’s down, that means everything’s on sale. So just buy more.
Seth
Sherry, what about you? Do you have advice for other folks who are thinking about retirement? Either starting saving or, folks who are younger?
Sherry
The advice I like to give to my kids and, and others is that you need to have a budget. Start paying yourself first to do your savings. Have your emergency fund but do 10% starting out. You won’t miss it. On most paychecks, when you start out a new job, you can’t tell if there’s taxes being taken out or your health care or whatever.
So, if you start out at ten, you’re already starting at a good spot and do it as young as possible. Like Mark was saying, compounding the interest, that volume and that bulk will double. I don’t remember if it’s 7 or 10 years, but it within that time range, your income in that account will usually double. And like I said earlier, if you get a 3% raise do a 1 or 2% increase in your savings, you’ll be that much farther ahead.
That way, when you’re older, like Gen X, if something comes up, you have something to fall back on. If you have to retire earlier than you planned or if you have a job loss, you have something with a lot of penalties. If you’re young but you have something else to fall back on and saving as early as possible is always the best deal.
Seth
Yeah, I love that. And I think something you said earlier, Sherry really stuck with me. Just kind of, you know, what are the things that are keeping you up at night? What are the things that are making you worry? And maybe sometimes as you’re getting closer to retirement, that’s making sure you have more money in your retirement account when you’re younger, it might be saving for your kid’s college education, or it might be putting money in an emergency fund because you’re worried about, you know, your roof having a leak or something.
Those priorities change throughout life, and that’s okay. That’s part of being at different stages of life. And I think, as you were describing, really starting that saving habit early makes it easier to pivot to those other priorities as your priorities change throughout life. So really appreciate both of you coming in and talking with us on the podcast.
Mark
It was great having the chat with y’all.
Jenny
Yeah, thank you.
[music outro]
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