Financial Vulnerabilities: All Generations In Danger

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Financial Vulnerabilities: All Generations In Danger

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.

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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.

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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).

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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.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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2 COMMENTS

  1. Regardless of which generation you belong, having a sound and stable financial strength is important especially when you are nearing retirement years. Although your spending may have been reduced during retirement, there are factors which could pose a threat to your nest egg, it is not wise to rely on social security alone which is expected to be not available for millennial and gen ex because advisers stated that the large number of boomers will exhaust the system. Americans should take advantage of several retirement income available to them such as 401, 403, IRAs, annuities and social security, whichever is best fit for you. Do not forget to factor in contingencies, so it is important to have emergency funds and risk management tools as suggested in FPSInsurance, it may include life, health, long-term care and home insurance, this will cover unnecessary expenses that will wipe out your savings.

  2. The key is to start saving/investing early in life and be consistent (save with every paycheck). Taking advantage of a matching 401k plan should be a no brainer. The power of compounding is lost on many people. Also maxing out contributions when possible, eliminating debt, avoiding risks with your nest egg, planning for multiple streams of income once retired (social security, pensions, dividends, part time work, etc.) and making catch up contributions once you reach 50 should all be part of everyone’s plan. And work at staying healthy to reduce illness, injuries and medical costs. I recently found the site Retirement And Good Living which provides information on all these issues as well as many other retirement topics and also has several retirement and health calculators.

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