Retirement is for Old People: Why Generation X and Generation Y May Never Retire

I was born on the cusp between Generation X and Generation Y (a.k.a. the Millenials).  As a member of the middle-child demographic recently dubbed Generation Catalano, I have some insight into how members of both of these generations view retirement. And I have to say, it isn’t pretty.

Pessimism and the American Dream

According to the results of a spring 2011 Gallup poll, confidence in the American dream is faltering. Defined by Gallup as the opportunity for each generation to earn a better life than previous generations, the data show that indeed, the American dream appears to be slipping away.

Only 44 percent of respondents said it was very/somewhat likely that today’s youth will have a better life than their parents, the lowest since 1983. This lack of optimism is most pronounced in the 50-plus demographic, with nearly two-thirds expressing pessimism for the future of younger generations.

But Don’t Just Take Gallup’s Word for It…

A few weeks ago I asked a bunch of Gen Xers and Millenials what they thought about their prospects for the future. By and large their views were consistent with the sentiments Gallup uncovered. They expressed pessimism, but also offered something not found in the poll—some insights as to why they felt that way.

  1. Social Security is Broken – This is well explored and contentious territory, so I’ll keep it brief, but most experts agree that financing Social Security in the current method soon will become unsustainable. It may happen in five years, it may happen in 20 years, but when it does happen, the root cause will be that elderly Americans will be drawing more than working Americans can afford to pay.
  2. Lack of Job Security – Despite recent gains, the United States still faces 8.5 percent unemployment, 15.2 percent underemployment and quite a bit of uncertainty about the job market. These dim facts are not lost on members of the younger generations, as many of them have been hit hard by the Great Recession without the benefit of many years of working and saving to cushion the blow. The bottom line is that lack of full-time employment means no steady salary and no company-matched 401 (k) or corporate pension plan.
  3. Stock Market in the Dump – Although data show that the stock markets are recovering steadily over the last three years, a significant number of people my age don’t perceive it that way. This is partially due to shell shock from watching their burgeoning portfolios (or their parents’ portfolios) disintegrate and partially due to a lack of education and understanding about investment and savings strategies. Other contributing factors are cynicism over corporate corruption and a deep distrust of government financial institutions, large investment banks and “Wall Street”.

No Clear Path to Retirement

These three factors combine to form a bleak view of the future, with no obvious way forward for members of Generation X and the Millenials. Those who are optimistic enough to still expect to retire in some form also typically expect to work past normal retirement age. Indeed, there is research indicating this trend has already begun and is picking up steam. The results of the Survey on Generational Retirement Perspectives indicate that three out of four respondents believe working part-time after age 65 best represents what it means to retire for most people.

The real bummer is that delaying retirement past 65, even as late as age 80, still may not provide enough income to cover basic retirement expenses, according to a study by the Employee Benefit Research Institute.

Stay Tuned for Our Next Episode…

So, like I said at the beginning, it isn’t pretty. The research suggests a need for Generations X and Y to redefine their expectations for the future. In my next post, I will talk about what those expectations are, ways to manage those expectations and some reasons why things might not actually be as bad as they seem.