At age 30, Bryan Short has, by any standard, achieved professional success since graduating from Boston College and law school at the College of William and Mary. Yet despite his job as a Washington mergers-and-acquisitions lawyer, he's nowhere near as financially secure as he expected to be by now.
He and his wife own one car and rent a 500-square-foot studio apartment. More than one-third of his take-home pay is gobbled up by repayment of college and law-school debt. Children are unaffordable right now. And retirement savings? They've barely begun.
"Despite being what most would consider clearly upper-middle class, highly educated and almost assuredly on no one's pity party list, I can assure you we live an extremely modest life," says Short, whose wife, Regina, is pursuing an MBA at Johns Hopkins University.
For years, experts have warned that too many of the USA's 79 million baby boomers aren't financially ready for their coming retirements. Yet, if the boomers have had it hard, it's nothing compared with those next in line: Generation X — people such as the Shorts. The Gen Xers, generally defined as those born from 1965 through 1980 — now 27 to 43 years old — have even less assurance than the boomers of receiving company pensions and projected Social Security benefits.
In 1979, when the oldest Gen Xers were teenagers, the sole retirement plan for 62% of workers was a traditional pension, according to the Employee Benefit Research Institute (EBRI). By 2005, when most of the Gen Xers had joined the workforce, that number had flipped: 63% of employees found themselves covered only by voluntary 401(k) plans. So much for the corporate safety net.
On top of that, the Gen Xers' life expectancies, and thus their retirements, will likely exceed even the boomers'. They'll need to save more aggressively. Yet, burdened by high housing costs, stifling college debt, stagnating wages and outsize health insurance and gas prices, Gen Xers are saving too little for retirement, just as workplace benefits have shrunk.
According to the EBRI, more than one in three workers ages 35 to 44 aren't setting aside any money for retirement. Among those ages 25 to 34, 45% aren't saving.
The Center for Retirement Research at Boston College has calculated that 48% of Gen Xers are at risk of being unable to maintain their standard of living in retirement, says Andrew Eschtruth, the center's communication's director. Compared with the boomers, Eschtruth adds, the Gen Xers "always have the highest at-risk scores. The changing retirement landscape is gradually becoming more challenging."
"One of the biggest issues facing the Gen Xers," observes Pam Hess, director of retirement research at Hewitt Associates and a Gen Xer herself, "is lots of competing priorities, juggling lots of different costs and financial priorities. It will continue to be a struggle."
Consumer debt is one of the main reasons. Nine out of 10 consumers in their 30s are in debt, compared with 76% of those in their 20s, according to the Federal Reserve's Survey of Consumer Finances. In a recent Charles Schwab study of more than 2,000 Gen Xers nationwide, 45% of respondents said they had too much debt to think about saving.