
GenX Are a Retirement Time Bomb for the American Economy - TechFinder
https://medium.com/utopiapress/genx-are-a-retirement-time-bomb-for-the-american-economy-8de323da970f
======
ThrustVectoring
It's important to keep in mind that current workers _always_ are the ones
supporting current retirees. It doesn't matter if it's through taxes in a pay-
as-you-go system like Social Security, or through the various investments a
fully funded account would own. At the net macroeconomic level, workers make
stuff and a portion of that gets redirected to taxes, debt repayment, and
return-on-capital that non-workers then consume.

In other words, GenX getting squeezed by debt payments and cost-of-living etc
isn't something that comes ex nihilo. It's deeply related to the demographic
situation - large number of long-lived Baby Boomers compared to the
demographic makeup of prior generations.

~~~
cimmanom
And to keep social security solvent for GenX would require squeezing
Millennials even harder by increasing the taxes or reducing payouts or both.

~~~
pmoriarty
Or, you know, the US could refrain from starting three trillion dollar wars,
and cut the bloated military budget.

~~~
ThrustVectoring
That only buys time against the long-term trend of increasing retirees per
worker. Which is great and all, but there's only so much military budget bloat
to cut. Eventually you need either higher taxes or savings, more workers per
retiree (eg, through raising retirement age), higher worker productivity, or
lower real consumption by retirees.

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dragonwriter
> Almost half of Gen X respondents, defined as ages 38 to 53, said they have
> no money saved in a retirement account.

> Curiously, the Gen Xers were the least likely generation to say they would
> save or invest an extra $1,000, instead using it to pay outstanding bills
> and debt.

How is this “curiously”? The fact that GenX has high debt balances is why
their marginal income is more likely to go to paying (high-interest) debt
rather than going into (low-yield) retirement savings, which is also why they
don't have retirement savings since their money has instead been going to debt
repayment.

~~~
ac29
> (low-yield) retirement savings

Not sure about that. The last 20 years (most of Gen Xers working lives),
returns in the stock market have been reasonably good, despite there having
been multiple recessionary periods.

Jan 2000-April 2019 S&P500: 5.688% annualized (190.085% for the period)

[https://dqydj.com/sp-500-return-calculator/](https://dqydj.com/sp-500-return-
calculator/)

~~~
dragonwriter
Low yield compared to paying off debt. Reasonably good stock market yields are
still well below lots of the debts people have; 5.688% isn't much more than
interest on a lot of federally subsidized student loans, and far less than on
lots of consumer debt.

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rconti
"U.S. households with any kind of debt — mortgage, credit cards, student
loans, auto loans, etc. — owe an average $135,768"

So, if we exclude everyone who has no debt, and include mortgage debt as
'debt', Gen X has a scary-sounding level of debt! Whodathunkit?

I started a new job last year, and it's pretty scary to login and look at my
401k, where it says: "People My Age: Average Savings Rate: 6%. Account
Balance: $29,428". Now, presumably, some/many of their account holders ALSO
have other retirement accounts, but I imagine the average age of these
accounts is probably more than the 1 year I have into it.

~~~
eej71
Would probably be more useful to know the relative size of the mortgage that
remains to be paid compared to prior generations at the same age. Or even -
the average amount of debt relative to the holder's average annual income and
compare that against prior generations at that age.

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sevensor
I wonder if this in any sense reflects the Gen-X cynicism I associate with the
1990s, the expectation that the system that bore up their parents would
crumble before their turn came. Had perhaps already crumbled. Were they right?
Is this self-fulfilling prophecy?

~~~
jvreagan
As a Gen-Xer, I think that cynicism had its roots in both the 80s and 90s with
the number of companies that left our parents out to dry with disappearing
pensions and people doing the math to realize that Social Security was
unsustainable and would be gone by the time we retire. And somehow our
generation was expected to support all of society including the generation
behind us.

I would postulate the opposite - I would have thought because we believe that
neither companies nor the guvmint would be there to support us, we would have
fended for ourselves better (I know that's how I personally took it, and
many/most of my friends). But you might be right... sounds like an attitude of
"ef it, we're doomed" set in.

~~~
toomuchtodo
Social Security will not be gone, and it is not unsustainable at a macro
level. Currently configured, it will pay out ~75% of earned benefits once the
trust fund is exhausted in 2034. Several small changes, in concert, remove any
insolvency concerns. It keeps 22 million Americans out of poverty [1], and is
very efficient in terms of admin costs vs distributed benefits. I posit it's
cheaper to keep those benefits recipients out of poverty, versus paying for
what happens if they aren't kept out of poverty.

Healthcare? Universal healthcare (Medicare For All), allowing for shedding the
current jigsaw of healthcare benefits across the country. Less admin overhead,
more care providers. If you're a pension that committed to healthcare expenses
(state & local government, and manufacturers), you should be ringing the
Medicare For All bell the hardest, to get the necessary infrastructure in
place before your shortfalls arrive.

> I would postulate the opposite - I would have thought because we believe
> that neither companies nor the guvmint would be there to support us, we
> would have fended for ourselves better (I know that's how I personally took
> it, and many/most of my friends). But you might be right... sounds like an
> attitude of "ef it, we're doomed" set in.

Most Americans don't have the discretionary income after mandatory expenses to
save to "fend for themselves" due to forty years of wage stagnation. This is
why so many must rely on government programs to survive. [2]

[1] [https://www.cbpp.org/research/social-security/social-
securit...](https://www.cbpp.org/research/social-security/social-security-
lifts-more-americans-above-poverty-than-any-other-program) (Social Security
Lifts More Americans Above Poverty Than Any Other Program)

[2] [https://www.pewresearch.org/fact-tank/2018/08/07/for-most-
us...](https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-
real-wages-have-barely-budged-for-decades/) (For most U.S. workers, real wages
have barely budged in decades)

~~~
treis
>Social Security will not be gone, and it is not unsustainable. Currently
configured, it will pay out ~75% of earned benefits once the trust fund is
exhausted in 2034

The trust fund is the government loaning money to itself. Ultimately, it is an
accounting fiction. Instead of tax payers having to shore up a SS shortfall
they have to pay back T-Bills. Either way, there's about 3 trillion dollars
missing that will need to be paid.

~~~
toomuchtodo
As long as the US government exists and has taxing authority, the general fund
will survive and be able to support paying back special issues securities [1]
that were provided to Social Security. You can't invest the same way as
Vanguard and Blackrock at nation state scale (ie "let's throw it all in a
three fund/target date fund and call it a day"), although the Bank of Japan is
going to be a pioneer in acquiring and distributing the gains from public
companies in Japan [2] due to their demographic situation (which all first
world countries will eventually transition through).

I would agree there are lots of liabilities (somewhere between single and
triple digital trillions) we should start paying back now versus later though,
before the debt service becomes unmanageable and we steal from savers by
inflating the debt away, but this is a policy issue. We must stop kicking the
can down the road, as a society, as a country, and as a species.

[1]
[https://www.ssa.gov/oact/progdata/fundFAQ.html](https://www.ssa.gov/oact/progdata/fundFAQ.html)
(Frequently Asked Questions about the Social Security Trust Funds)

[2]
[https://news.ycombinator.com/item?id=19686549](https://news.ycombinator.com/item?id=19686549)
| [https://asia.nikkei.com/Business/Markets/Bank-of-Japan-to-
be...](https://asia.nikkei.com/Business/Markets/Bank-of-Japan-to-be-top-
shareholder-of-Japan-stocks) (Bank of Japan to be top shareholder of Japan
stocks )

~~~
ThrustVectoring
>You can't invest the same way as Vanguard and Blackrock at nation state scale

You can, it's just that current consumption is fulfilled by current
production. Current production gets allocated to some combination of return to
labor, return on capital, and taxes. All else equal, the state owning more
capital will just squeeze out some combination of return to labor and return
on capital. If you look at the cash flows, there's no difference between the
government owning 1% more of your employer vs taxing an extra 1% of the
company's overall value.

The biggest practical consideration is that taxation is a much more visible
way of paying for benefits for current retirees, so replacing that with less
obvious means is more politically viable.

~~~
ivalm
Taxes also provide steady cash-flow. For much of equity you need to sell in
order to get money back.

------
pmiller2
I’m wondering how these two statements comport:

> Just over half (53%) of Gen Xers report having three months worth of salary
> socked away — money that could be used as an emergency fund. What’s more,
> 48% of Gen Xers said they’re living paycheck to paycheck

Since 48 + 53 > 100, either there is a rounding error or there are people who
have 3 months’ savings who are also living paycheck to paycheck. I don’t see
how it’s possible to be living paycheck to paycheck and have significant
savings, unless this implies a sudden and relatively recent change in
circumstances. It would be interesting to see if there is more detail on this
in the linked MetLife study (which I haven’t got time to read right now,
unfortunately).

~~~
irrational
Is the 3 months of salary socked away somewhere it is accessible? I have
hundreds of thousands of dollars in 401k, but I live paycheck to paycheck and
have no readily accessible savings.

~~~
refurb
Why did you do that? You should be funding an emergency savings account before
funding your 401k.

Why? To avoid the situation you’re in - no easy access to savings.

~~~
irrational
Because my employer does 5% matching. So I put in my 5% and they put in their
5%. I know I should have an emergency fund, I just don't have the means to
fund it.

~~~
refurb
I see. That’s risky.

If you have steady employment, might I suggest opening a line of credit with
your bank? If you have good credit the rate is reasonable. It costs you
nothing unless you use it. And if you have to liquidate your 401k, you can pay
it back in days.

------
dv_dt
Are those stats really that different from those at or near retirement in the
boomer generation? They're also likely better (in the weakest sense possible)
than the projected retirements for Millenials forward.

~~~
rconti
Hard to say. We keep hearing that millennials can't afford to buy a house or
have kids; OTOH savings rates went way up after the 2008 recession and have
continued to fare surprisingly well.

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neogodless
The only comparison made in the article between Gen X and other generations
was the subjective statement of being spoiled by their parents. If this
article meant to be useful, it would compare other statements, like how many
of the previous generation had funded retirement accounts at this age.
Instead, it's doom and gloom scare tactics but I feel it lacks substantial
information to provide value.

------
JohnFen
I'm a little older than Gen X, but I share many of the same concerns. When the
economy crashed, I saw many people I know who had done everything right in
terms of retirement savings get wiped out just as they were retiring. They
were ruined.

It's awfully hard to have any sort of trust in a system that allows this to
happen.

~~~
whamlastxmas
If you're near retirement and your investments are so volatile as to be "wiped
out" and "ruined" by a short term economic downturn then they are absolutely
not doing everything right. In fact it's pretty much the opposite.

~~~
FilterSweep
“love to blame individuals for systemic issues.”

~~~
whamlastxmas
If by "systemic" you mean that the universe itself does not coddle you and
prevent you from making poor decisions, then yeah sure.

~~~
FilterSweep
Did the Bankers deserve 29Tn bailout?

How’s that for “coddling and preventing them from making poor decisions”

The yield curve has already inverted so we’re looking down the barrel of
“Recession The Sequel.”

But yeah, keep blaming GenX (and presumably GenY and GenZ) for someone else’s
problem. Many of them aren’t even earning a wage to save, _avocado toast_
aside.

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weaklearner
frankly I am quite skeptical of the macro-economic predictions of a
'blockchain mark consultant'

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cimmanom
Paywalled. :(

~~~
_eht
How else do you expect journalists to retire?

~~~
mt3ck
Ads give me ads!

