Generation X: Stuck in the Middle, in More Ways Than One

The Squeeze:

• This generation is in peak Sandwich Years, with expenses and competing financial needs piling on. But these are also key wealth-building years. 

• The big balancing act right now isn’t kids vs parents: It’s dealing with debt while still saving for retirement. 

• One bright spot? Gen X is the only generation who fully recovered from the financial punch of the Great Recession.

Generation Xers — who comprise about 20 percent of the U.S. population — used to be the cool kids in movies like Singles and Reality Bites. Now, we’re all grown up and navigating life in our 40s and 50s, the very epicenter of the Sandwich Generation squeeze. 

With a headcount of about 65 million, GenX is smaller than the clans that bookend them (namely, Boomers and Millennials), and as such they are often overlooked in all the media chatter. But Gen X is in their peak earning years, and are therefore the engines of much of American life right now. But make no mistake: It’s an intense moment for Xers, with ever-mounting familial responsibilities, expenses and savings vehicles vying for attention. 

So lean in and learn more about making the most of the coming years:

Gen X by the numbers: What you need to know

Here’s a closer look at how the “middle child” of Sandwich Generation-hood is faring (yes, the oldest Millennials are officially Sandwichers, too). Now in their 40s and 50s, most Gen Xers are the children of Boomers and are raising Millennial and GenZ kids – and have a lot of responsibilities.

• Managing debt is a priority: Generation X has an average debt — including mortgages, credit cards, auto loans, student loans and personal loans — of $125,000, according to research from Experian, the credit-reporting agency. That total far exceeds the national average consumer debt of $88,313 per adult. Perhaps it’s no wonder that 42 percent of Gen Xers feel stressed about their finances, while 23 percent of Boomers do, according to Allianz Life figures.
• Homeownership provides stability: Gen X is doing pretty damn well, on the homeownership front, thank you very much, with 2 out of 3 having this particular foothold in the American dream, outpacing Millennials (43) and nudging towards Boomers’ numbers (77 percent), according to US Census Bureau data.
• Saving is tough right now: Being in your prime also means encountering a mountain of expense. The median household retirement savings for Generation X is $64,000, less than half the $144,000 of Boomers. Meanwhile, more than a quarter (27 percent) of Gen Xers have saved less than $50,000, vs.18 percent of Boomers, says the Transamerica Center for Retirement Studies. At the end of 2019, GenXers had on average $5,000 stashed away for emergencies compared to Boomers’ $15,000. Especially concerning: During the pandemic, 27 percent of GenXers have taken a loan and/or a withdrawal from their retirement plan or expect to.
• Gen Xers are textbook Sandwich Generation. Each kid costs about $234,000 over the course of the first 17 years of life, while aging parents can require $140,000 in assistance, the Urban Institute reports. (Insert screaming or fainting emoji here.) Nevertheless, Gen X knows how to deal with financial stress: Its ranks are the only U.S. generation to completely recover the wealth lost due to the Great Recession, according to a new analysis from the Pew Research Center.

Challenges ahead

Midlife has its hurdles, and Gen X is running hard in what is perhaps the most competitive phase of the Sandwich Generation games. Our kids are rapidly advancing towards college; homeownership may feel at the “now or never” inflection point; and sadly, our previously all-powerful parents are showing signs of age.

All of which means that it’s time for frequent conversations and calibrations about your money — for you and the whole family, says Chris Farrell, author of Unretirement: How Baby Boomers are Changing the Way We Think About Work, Community, and the Good Life. “This is less about saving than spending,” he says. “Ask yourself, ‘What do I value?’” 

For instance, says Farrell, “if it’s really important to help pay for a child’s education, okay – but home remodeling is going to have to wait.”

Here, are a few key priorities to wrangle:

• Fattening up one’s “nest egg” for the future. A recent Schwab Retirement Plan Services’ survey of 401(k) plan participants found that 42 percent of Gen Xers are more focused on paying off debt than saving for retirement. In other words, that’s a lot of people who are crossing their fingers about retirement rather than shoring up their funds. That could spell trouble later on, especially if it means missing out on a company match. (Do not let that happen!). Professional guidance now can help avoid the “playing catch-up” game later. Also, thinking about how to manage eldercare expenses for one’s parents and oneself is key. Long-term care insurance, for instance, is a rapidly evolving option to explore.
• Decimating your debt. We aren’t going to sugarcoat it: Gen Xers are in the deepest of debt trenches. At age 44, Americans owe an average of $138,916, says Experian, almost 50 percent more than the national average. Yes, that’s a huge number, but a bit of context. The debt load just goes with this moment in your life when everything (car loans, credit-card bills, student loans, home repairs, eldercare expenses and more) seem to conspire to vacuum up any available cash. The silver lining is that the debt total starts to decline at a good rate past age 48 (as student loan debt and home date often starts to decrease).  
• The kids and college conundrum. How the heck to save for retirement while helping kids through college? Prevailing wisdom says not to abandon retirement savings since there are ways to borrow towards educational expenses, either as a parent or student. For many Gen Xers, however, this is tough to do, since many have had their own experiences with mammoth student loans and worry about saddling their kids with the same. Such guilt can derail saving for your own future, however. Bring your children into the conversation, says Farrell. Do they understand the balance between your saving for their education and your own retirement? They should. Also, a financial planner who understands your generation can fill you in on options and the best path forward.
• The vanishing emergency fund. As the year that dare not speak its name (a.k.a. 2020) showed us: unexpected events do happen they can drain our available resources pretty quickly. That’s why saving for at least three months’ worth of expenses is an important goal. It sounds daunting but even small contributions will help be prepared for the inevitable tough times. Setting up small, regular auto-deductions for each pay period — with the money going into an account you can’t easily debit — is one way to tackle this goal.

No doubt, you’re under pressure. But this intense life stage also presents so many amazing moments and milestones. By laying a good foundation for financial planning at midlife and tweaking it regularly, you’ll keep your money and future on track, and your stress under control.