I’m a CFP: Why Gen X Shouldn’t Be Worried About a Recession Ruining Their Retirement

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As a certified financial planner practitioner who happens to be in the Generation X era, there are some unique variables that can create concern for people born between 1965 and 1980. Known as the sandwich generation, there are multiple experiences that have impacted how this generation sees and responds to money.

At the same time, comprehensive planning has considerations that are new. Yet, it should not disrupt anyone’s ability to plan effectively for retirement. Here are three reasons why Generation X should not be worried about any recessions ruining their plans for retirement.

The Baby Boomer Wealth Transfer

People who are a part of the Generation X era stand to be the primary benefactors of the greatest wealth transfer from baby boomers. While it is critical for people to focus on independent financial wealth accumulation and stability, incorporating a known inheritance into your own financial plan isn’t uncommon.

Having a conversation with your parents, especially during discussions that address their overall estate planning objectives will offer you a clear idea of how to navigate and rely upon an inheritance. One note of caution that can detrimentally impact an anticipated inheritance is poor long-term care planning.

Inaction towards your parents aging journey can affect their financial nest egg, while simultaneously impacting your ability to earn during your peak earning years if you are tasked with becoming the primary caregiver to their needs.

The Length of Recessionary Periods

It’s fair to state that the Generation X community endured three recessionary periods during their working years. The first was the dot.com recession of 2001, followed by the Great Recession of 2008 due to the implosion of subprime loans and finally the 2020 coronavirus recession. 

The 2008 recession was the longest one that directly impacted Generation Xers and it lasted approximately 18 months. Many people lost their homes, job loss greatly exacerbated the recession and the impact was devastating. Afterwards, the growth was slow and erratic.

However, a well-balanced portfolio coupled with systematic investment in preparation for retirement gave the average Generation Xer the opportunity to consistently invest into the market over time. History has shown that incremental savings not only helps ease the anxiety of an investor, but it also allows a smaller investor to accumulate wealth that will help the individual maintain their standard of living for the duration of their life after retirement. 

This helped individuals tremendously as the market began a period of accelerated growth beginning in 2015 when the stubbornly high unemployment finally tapered off. The systematic investment approach provided full participation in the market. So as people began to reenter the work force, Generation Xers had the opportunity to readjust their financial goals to still achieve their objectives. Also, when they near retirement, they will not need every dollar once they separate from employment services.

Their money should remain invested, and recessionary periods eventually pass.

Generation X Draws Lessons from Both Baby Boomers and Millennials

What are the primary challenges that can impact someone in retirement? Broadly speaking, it would be inadequate savings and unanticipated crisis that have an economic impact. 

Generation Xers have the opportunity to identify financial vulnerabilities that the baby boomer generation is experiencing and make the necessary adjustments in their own financial plans. For example, long-term care needs for aging citizens can deplete resources rapidly and cause an adult to live in poverty at the most inopportune time.

Gen X people, as primary caregivers, are learning the lessons firsthand by engaging with their parents’ challenges and making the necessary financial adjustments. They are learning the difference between Medicaid and Medicare. They are seeking insurance protection to protect their overall financial well-being.

At the same time, they see how millennials view social benefits and they are taking notes. They are saving more so they are not so heavily reliant upon that social benefit. For Generation Xers with homes, they are using wisdom due to current interest rates and paying down the debt without absorbing new debt.

Each financial decision a Generation Xer makes prepares them more for retirement. Recessions are overwhelming and they can have a negative impact on a person’s lifestyle if a great financial need is present at the most inopportune time. However, when planning the Generation X community have the greatest commodity of time to their advantage. As long as they continue to monitor their goals and objectives, they don’t need to worry about any recession ruining their retirement.

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