Boomers And Gen-Xers: Two Different Takes On Retirement

The generations are at different stages, but both need to have plans

August 29, 2013
by Mark Huffman

cons-affEveryone, if they live long enough, will look forward to retirement but not everyone is at the same place when it comes to building a retirement strategy. What is right for a 60-year old Baby Boomer is probably not right for a 40-year old Gen-Xer.

Even among people the same age group, there is no such things as a one-size-fits-all approach to retirement planning. And it’s definitely different for Boomers and Gen-Xers. Michelle Perry Higgins, a principal at Maloon Powers Pitrie & Higgins California Financial Advisors, in San Ramon, Calif., says Boomers should be focused on aligning their financial plans with their retirement plans.

“Having a strong financial plan in place, well in advance of retirement, will answer the questions as to when they will be able to retire and what retirement will look like for them,” Higgins said.

After all, the greatest retirement plan in the world is worthless if there isn’t a solid financial plan to back it up. It serves as sort of a reality check.

Shows what you need to do

“For example, if a Boomer’s financial plan shows that they have not saved enough into their retirement plan, then they should decrease current spending and increase retirement savings,” Higgins said. “Similarly, if their financial plan dictates that downsizing their home needs to occur, then they should take action to ease the stress of that transition.”

What should be in the financial plan? For Boomers, it’s important to have a well-diversified portfolio at this point. Their time line is much shorter, and shrinking.

“They definitely took the brunt of the Great Recession,” Higgins said. “For those who had strong defensive barriers, bonds and cash equivalents, it was easier to sleep at night when the equity markets were having tantrums. For all Boomers, maxing out their 401(k) pre-tax allowable limit, along with their catch-up is usually a must on my list.”

The oldest Boomers are already at retirement age. The youngest are turning 50. They still have some flexibility in planning their retirement but should take advantage of that extra time.


Gen-Xers, those in their late 40s and younger, have an advantage of even more time. Higgins recommends members of this generation get serious about eliminating debt – paying down credit cards, student loans, car loans and living in a home with a mortgage they can comfortably afford.

Of course, many Gen-Xers still have a lot of family responsibilities that have an impact on finances.

“College costs have increased dramatically and retirement for Gen-Xers will only be attainable by adequately preparing for their children’s higher education expenses,” Higgins said. “Without good preparation, paying those college costs could delay retirement for the parents. Instead of being overwhelmed by college expenditures and ignoring what will be coming, Gen-Xers need to address it head on.”

That means sticking to budgets and putting away money for both retirement and education – sometimes hard to do at the same time. Over the last several years much of the coverage of retirement issues has focused on Boomers, but the generation behind them has quietly been working on a plans of their own, and going about it a little differently.

High on Roth IRAs

“Gen-Xers seem to have latched on to Roth IRAs, which are a wonderful savings vehicle, overall,” Higgins said. “One of the shortcomings of this type of savings plan is that the Roth limits are not as high as the 401(k) federal limits.”

Unlike a traditional Individual Retirement Account (IRA), contributions to a Roth IRA are not tax deductible when you make them. But unlike a traditional IRA, withdrawals are not taxed when you start making them in retirement. That allows the investments in the account to grow and provide tax-free income in retirement.

Higgins says she also sees Gen-Xers flocking to mutual funds, which offer a variety of investment options. And many are making every penny count.

“Gen-Xers are smart and have gravitated toward no-load funds which, in my opinion, is a prudent move,” she said.