All generations face financial vulnerabilities, with Generation Xers being the worst off, according to a new study. Financial Finesse conducted the study to determine what types of financial vulnerabilities Americans face and discovered that the most common issues vary widely according to generation.
financial vulnerabilities – Millennials carry recession “baggage”
The study found that Millennials (those under the age of 30) are doing pretty well at managing their money from day to day. However, they’re carrying a lot of what the researchers call “psychological ‘baggage’ from the Great Recession.”
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This is evident in the way Millennials invest because they focus more on taking care of immediate problems instead of building long term wealth. For example, they’re prioritizing student loan debt and focusing on not losing money. In addition, they have the lowest participation rates for 401(k)s, with 83% of them participating even though more of them are exposed to auto-enrollment compared to Generation Xers and Baby Boomers.
The biggest concern for Millennials is that they aren’t saving enough for retirement. A related problem is that they aren’t saving enough for emergencies, which results in many of them raiding their retirement savings to pay for unexpected emergencies. Millennials also tend to be risky with their investments.
Another issue is they tend to have large amounts of student loan debt, with the average amount for those ages 20 to 29 climbing by more than 60% to a little over $25,500, compared to the average of less than $15,900 in 2005. In fact, nearly 37% of Millennials’ total debt is student loans, compared to 13% in 2005.
Generation Xers have the most financial vulnerabilities
The generation that is the most financially stressed is Generation X (those between the ages of 30 and 54), according the study, as researchers say they’re the least likely to be able to achieve financial security. Generation Xers tend to put their children first, sacrificing their own financial security.
Just 17% of them are on track to “retire comfortably,” while 23% participate to a 529 college savings plan for their children. Generation Xers also face a great deal of financial stress with elderly parents to support financially in addition to mortgages. However, they have also shown the most significant improvements of all three generations (Chart is courtesy Financial Finesse).
Like the Millennial generation, Xers also aren’t saving enough money for emergencies. This is a bigger problem for Gen Xers, however, as they are more likely to own a home and they don’t have their parents to fall back on for financial assistance.
Financial vulnerabilities – Baby Boomers not ready for retirement either
The Baby Boomer generation (those age 55 and older) are, unsurprisingly, the most financially secure. However, even Boomers aren’t ready for retirement, as many of them are delaying retirement because they have not saved enough money.
The biggest financial vulnerabilities Baby Boomers face are problems paying for health care, not only because they’re living longer but also because they have not planned for long term care insurance. The U.S. Dept. of Health and Human Services estimates that 70% of Baby Boomers will need some type of health care in retirement, but only 16% of them say they have long term care insurance.