"Generation X" and "Generation Y"

How they see the world and save for retirement  

Every generation has different assumptions about how the world works.  But could these differing views affect how each generation plans for retirement?  These two topics may seem disjointed, but generational experts think they could be connected.  

Tamara Erickson, author of “Retire Retirement: Career Strategies for the Boomer Generation," “Plugged In: The Generation Y Guide to Thriving at Work,” and “What’s Next, Gen X? Keeping Up, Moving Ahead, and Getting the Career You Want,” has found that many blanketing generational differences occur because of the distinct norms and stimuli each generation is exposed to in their formative years.  This is the period of physical and psychological development from the onset of puberty to maturity.  The basic idea is that, at an early age—normally between the ages of 11 and 16—we form specific decisions and opinions (such as, who we trust and what takes precedence in our lives) that will subconsciously shape the lens in which we see the world for the rest of our lives.

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The core, fundamental values of Gen X and Gen Y

Generation X, individuals born between 1965 and 1979, grew up in a time of change and uncertainty.  They were the first generation of youth to become latchkey kids—as it was during their childhood when women entered the work force in numbers and divorce rates began to rise. As teens during the 1980’s recession, X’ers were also profoundly impacted by witnessing the adults in their lives go through corporate layoffs.  According to Erickson, all of these experiences culminated, generally instilling in X’ers a distrust for institutions and teaching them to value self-reliance.

Gen Y, those born from about 1980 to 2000, had different issues to contend with during their youth. Their ideas of the world and life were shaped by tragedies like the Columbine school shootings and September 11th.  These types of random acts of violence taught Generation Y that life is fleeting and that one should live for today.  This is why members of Gen Y want seek instant satisfaction, wanting to know that what they are doing at any given moment is meaningful, says Erickson.

Differing views on retirement

Each generation’s unique perceptions and life outlooks leads to differing retirement strategies.

Generation X’s reluctance to blindly trust the establishment impacts how they interact with financial professionals.  According to Erickson, many X’ers would prefer to keep their money in their own hands, than place it in the care of an institution.  For the X’ers who do invest through an adviser or savings plan, most will probably want a great deal of diversification within their portfolios to help them feel less at risk and prefer independent advice.

On the other hand, Erickson has found that many Gen Y’ers have yet to start saving for the future.  Much of their money is focused on the present or paying the debts — helping them to pay off student loans and finance their creative ideas and business ambitions.  For the Gen Y’ers who are saving, many are not saving enough. It has been difficult to convince this instant-satisfaction-seeking generation of the benefits of building up a nest egg for tomorrow.  

One view Gen X and Gen Y do seem to share, however, is that their retirement approach will be different from previous generations’ retirement experience.  As the first generation without traditional pensions, GenX understands that they will need to rely on themselves and their savings for the majority of their retirement income, says Erickson.  And staying true to their desire for instant satisfaction, Gen Y’ers are gravitating toward the idea of ‘not waiting for retirement.’  Erickson says she believes that they don’t follow the ‘school, work, retire’ approach to life. They go to school a little, travel a little, work a little, play a little, travel a little, etc.  They focus on what makes them happy now, not what society has prescribed. 

As in most studies of two differing subjects, we can learn from both value systems: 

Advice for Gen X:  Take a page from Gen Y’s playbook and stop following a playbook.  You don’t have to wait until retirement to do the things you love.  Consider easing into retirement by taking long weekends or evening working part-time so you can explore your interests and determine how you want to spend your time in retirement. 

Advice for Gen Y:  Self-reliance is a valuable trait, especially as it relates to  finances.  You can still have fun today while planning tomorrow.  Just think of it as funding your future satisfaction and happiness.