- Retirement Investing Across Generations -FDR
In this article Freedom Debt Relief (FDR) walk us through what retirement was like in previous generations and how things have since changed.
Silent Generation (1925 – 1945)
For many of this generation, the wake of the Great Depression is forever imprinted in their minds. It’s association to the stock market molded this generation’s investing and retirement biases.
Although, they had a few advantages and unlike present generation, they didn’t have to depend on the stock market for retirement. Freedom Debt Relief breaks these advantages down into three main categories:
- Company pensions
- Investing into the company stock
- Social Security
Being a lifetime employee of a company use to be a reliable path to retirement. Those days are long gone. However, depending on the above 3 retirement options today no longer works.
Baby Boomers (1946 – 1964)
Baby Boomers tends to follow the investment advice of “invest in what you know”. Their investment education was very limited, which did not always lead to great investment decisions.
Investing in what you know might work well in the short term but for retirement, there are many factors that need to be taken into account. Among these important factors are the following:
- Time to retirement
- Expected number of living years after retirement
- Overall portfolio allocation
- Rebalancing of a portfolio
Buying what you know simply doesn’t take these factors into account. Resulting in a retirement portfolio that isn’t designed for retirement.
Boomers also got hit hard by the tech bubble collapse and the housing market crash.
The lesson here is that a well-designed portfolio, often created by a professional, is needed to ensure it meets your retirement needs.
Generation X (1965 – 1981)
With high inflation and education tuition for their children, GenX didn’t put the majority of their financial planning into retirement. Getting their kids into a great school was always a top priority. But it came at the cost of funding their retirement.
While a great education is important, sacrificing your retirement for it is not an option. It can put the entire family under an unnecessary burden.
Freedom Debt Relief offers this advice to GenX’ers: Just like Boomers, proper planning for GenX’ers is the key to ensuring their retirement will be there when they need it.
Millennials (1982 – 2004)
Technological advancement has helped simplify financial transactions and boost return on investment of Millennial Generation. However, high returns and aggressive use of financial algorithm by investment managers have exposed millennials to high investment risk, and some cases eroded their entire savings. Instant gratification and unrealistic investment goals continued to hurt this generation. Hence, there is need to seek the assistance of professionals that understand how to manage retirement portfolio, while limiting risk exposure and gradually reducing personal debt.
Knowing that retirement investing is a long time game, this doesn’t bode well for millennials. In fact, Personal Capital’s 2016 Retirement Readiness Survey found that 40 percent of millennials don’t have any retirement savings.
It isn’t all bad for Millennials though. While the technology they’ve grown up with makes almost anything instantly available, it has also given them unlimited access to financial education. This generation knows more about retirement than any of the previous generations.
Their questions are pointed and demonstrates they’ve done the necessary research. Knowing there are things about retirement planning that they don’t know will go a long way to creating a stellar retirement plan.