Tag Archives: Generation X

How can employers communicate effectively to different generations?

What constitutes effective HR communication for Millennials, Gen-Xers, and Boomers today? In the latest episode of Critical Point, Milliman’s Heidi tenBroek and Jill Godschall discuss how generational differences, behavioral economics, and technology are driving change in the HR communications space.

To listen to the entire podcast, click here. Also, to hear past Critical Point episodes, click here.

Recruiting a workforce with intergenerational strategies

By 2020, five generations will work together at some companies for the first time. Human Resources (HR) departments that prepare to meet the different needs of each generation will secure the best talent. A recruitment approach that aligns corporate business strategies, internal equity, and employee compensation can be an effective strategy. Milliman’s Anthony Halim offers perspective in his article “Effective intergenerational employee compensation approaches.”

Generation X: Factoring healthcare costs into retirement planning

pink-lesleyThis is the final blog in a three-part series exploring the economic history and future of Generation X. The series focuses on what this generation can do to prepare for retirement. In the first installment, we highlighted some of Generation X’s financial predicaments and, in the second installment, we discussed savings, pensions, and Social Security. The last blog focuses on Generation X and healthcare.

Many of us Generation Xers are not factoring healthcare costs into our retirement planning, which is a mistake. As healthcare expenses continue to rise and as we age, having a plan in place makes sense.

The cost of healthcare in the United States is increasing every year. According to the most recent Milliman Medical Index, in 2015, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan was $24,671. Healthcare costs for this typical family have more than doubled over the past decade.

To combat rising healthcare costs, there is something Gen Xers can do now—start a health savings account (HSA). An HSA has several tax advantages. The money isn’t taxed on the way in and grows on a tax-deferred basis. Additionally, it can be withdrawn tax-free when used to pay for qualifying medical expenses both at present and in retirement.

What many people—including Gen Xers—don’t realize is that an HSA could be an investment option relating to medical costs in retirement. Medicare doesn’t cover all healthcare costs, like nursing home and assisted living expenses. HSAs could be useful when paying for medical bills and paying for long-term care. But Gen Xers should also consider whether it is better to save money for long-term care in an HSA or buy a long-term policy. Doing the due diligence on the options now can save money down the line.

According to Dawn Helwig, a principal at Milliman, it is smarter to buy a policy sooner rather than later. As she said in a 2014 Wall Street Journal article, “For each year applicants in their 50s delay buying coverage, carriers typically raise premiums by 3% to 4%, simply because they are a year older….” Helwig also noted that those who wait to buy this insurance may encounter higher premiums down the line because carriers are dealing with losses on existing policies. With those losses, they have raised premiums between 4% and 8%.

Another option that we Gen Xers can consider when we reach retirement age is rethinking Medicare plans. Medicare itself has four parts: hospital insurance (Part A), medical insurance (Part B), Medicare Advantage plans (Part C), and prescription drug coverage (Part D). At age 65, most people are automatically enrolled in Medicare. But Medicare doesn’t cover everything, and participants must pay copayments and deductibles.

Those who have Medicare Parts A and B can decide to receive all their healthcare services through a provider organization under Part C, also known as Medicare Advantage. Most Medicare Advantage programs have low monthly premiums, and they cover all of the services offered under original Medicare except hospice. To determine whether Medicare or Medicare Advantage is a better option financially, it is important to compare and contrast the costs associated with each one.

As one Gen Xer says, “My parents got to think about what they wanted to do at 65. I don’t have that option. We are running into something that our parents didn’t have to deal with.”

Clearly, Generation X hasn’t had it easy and faces numerous challenges on the way to retirement. But by doing some research and planning for the long term, we might just be okay.

Generation X: Savings, pensions, and Social Security

pink-lesleyThis is the second blog in a three-part series exploring the economic history and future of Generation X. The series also focuses on what this generation can do to prepare for retirement. In the first installment, we highlighted some of Generation X’s financial predicaments.

Generation X faces major retirement challenges.

Besides the issues of job security and stagnant wages, there is the topic of cold hard cash—saving enough, having enough, allocating enough.

Some Gen Xers know that they started saving too late and wouldn’t be able to make up the difference. Others were worried because they’d been saving since they got their first jobs—20+ years ago—and felt that that money still wouldn’t be enough when they reach retirement age. And others just couldn’t save. As one fellow Gen Xer put it, “My wife and I don’t make enough together to save for retirement and the kids.” And let’s not fool ourselves—“retirement age” no longer has a firm definition.

We Gen Xers aren’t alone. According to the 2015 Retirement Confidence Survey published by the Employee Benefit Research Institute, “Almost two-thirds of workers (64 percent) say they feel they are behind schedule when it comes to planning and saving for retirement.” This survey also notes that cost of living and day-to-day expenses top the list of reasons why workers don’t save (or don’t save enough) for retirement.

Pensions, often referred to as defined benefit (DB) plans, used to be a mainstay. But they are not as common as they once were, and this, too, is affecting Generation X. In fact, according to Jennifer Leigh Parker on CNBC.com, Generation X is the first generation to see its pension leg replaced by 401(k) savings plans, which were increasingly adopted during the 1980s. The 401(k) plans are portable but aren’t designed as a monthly “pension paycheck.” The owner of the account balance has to take significant action to understand and convert any or all of it to that pension paycheck. Gen Xers , in general, will find that its collective savings plan account balances are woefully deficient and for many, sitting in a tax-deferred account. And the Internal Revenue Service (IRS) can’t wait for us to start cashing them out.

Additionally, we Gen Xers, who have been paying Social Security payroll tax for years, may not receive full benefits upon reaching retirement age.

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Generation X and retirement: The background

pink-lesleyIn this three-part series, we explore Generation X’s economic history and discuss what this generation can do to prepare for retirement.

While the so-called “me me me generation” of Millennials has received most of the financial spotlight of late, this blog focuses on my demographic brothers and sisters, those of us from the Reality Bites and Pearl Jam era. We are Generation X, and we face major retirement challenges. Reality does, it seem, bite for us. But there is some hope.

There are about 46 million of us born between the mid-1960s to the late 1970s. It’s been noted here and here that Gen X was hit especially hard during the 2008-2009 financial market collapse. According to the Pew Charitable Trusts, Generation X lost almost half of its wealth during the economic downturn.

Forbes wrote in 2013 that “…a recent census report found that people between 35 and 44 saw a 59% decline in median household net worth between 2005 and 2010, the largest drop of all age groups.”

The repercussions from that recession will reverberate for years. As Ivory Johnson wrote in 2014 on CNBC.com, “Members of Generation X face the daunting task of planning for a retirement that will likely include no pension, a potential Social Security haircut, stagnant wages and high education costs for them and their children.”

We in Generation X continue to contend with stagnant wages and job insecurity.

According to a recent report from the Economic Policy Institute, real hourly wages fell or stagnated across the wage spectrum between 2013 and 2014 even for those with a bachelor’s or advanced degree. The report says, “Comparing 2014 with 2007 (which was the last period of reasonable labor market health before the Great Recession), hourly wages for the vast majority of Americans have been flat or falling.”

Besides stagnant wages, we are also facing unique issues in the workplace, which come from being wedged between the two largest generations in history. With Gen Yers nipping at our heels and Baby Boomers blocking the path to advancement, Gen X is in an uncomfortable position. In a 2010 Washington Post piece, Joe Frontiera and Dan Leidl wrote, “As both groups [Baby Boomer and Millennials] jockey for position, Gen Xers are left to alternately fend off overeager newbies and patiently wait to earn a rare opening at the top.” Frontiera and Leidl also note that many Gen Xers have been in the same position for a long time and are “butting up against the Gray Ceiling, a stagnating phenomenon…”.

And those Baby Boomers (born between 1946 and 1964) don’t appear to be going anywhere. Gallup notes that Baby Boomers are staying in the workforce longer: “As the largest generation born in U.S. history, Baby Boomers’ sheer numbers coupled with their reluctance to retire will likely ensure that their influence endures in the workplace in the coming years. The generation still constitutes about one-third (31%) of the workforce…”.

In this blog series, we take a look at the financial challenges that Generation X has been dealing with recently and how this generation can plan for the future. We also talked to several fortysomethings about their retirement concerns and what can be done to address them (quotes are sourced from conversations in 2015).

“Retirement security” for the neXt generation

All the focus on Boomer angst about retirement in the post-financial crisis world tends to overshadow the dilemmas faced by members of Generation X, those born between 1965 and 1980.

The financial crisis, the Great Recession, and the potential for a career-crippling  jobless recovery have exacerbated the problems of this key demographic, who are already confronting a future without pensions, a sure-to-be-changed social security system, increased taxes, and mountains of personal debt.

Throw in an increasing life expectancy—not to mention the financially depressed circumstances of their parents (and how that will affect inherited wealth—see the blog entry “Prescription for Disaster”)—and you have the ingredients for an actuarial nightmare that asset managers and financial advisors of all stripes will need to confront.

In fact, a recent article in thestreet.com—a major source of information for this crowd—is actually saying that the old prescriptions were wrong; the neXt generation is going to need to put away a lot more than $1 million dollars to live reasonably well in retirement (think $3 million in some cases).

And this at a time when real growth probably won’t return to the Boomer-fueled economic expansion of the past 30 years.

Among other things, these factors are going to redefine what constitutes “retirement security” for this generation.

The expectation that more money is needed than previously expected, reinforced by neXt Generation authorities like thestreet.com, will dictate how financial providers and advisors adapt traditional investment instruments such as variable annuities and other guarantee products to address the unique challenges of Generation X-ers.