Generation Xers – Trouble ahead?

A recent survey conducted by Perrys Chartered Accountants has revealed that 75% of Generation Xers feel less financially secure than their parents.

65% of those surveyed believe that they will not have enough income to enjoy their retirement whilst 6% of those surveyed have made no plans whatsoever as they are relying entirely on inheriting directly from their parents.

Generation Xers

General Xers are individuals that were born between 1965 and 1980 and are, therefore, currently aged between 38 and 53.

Generation Xers succeeded the baby boomers (currently aged between 53 and 73) and preceded the millenials – currently aged between 25 and 38.

 

What are the problems and why have they arisen?

75% of General Xers feel less financially secure than their parents.

Reasons :

• There is now a much larger disparity between earnings and property prices
• It is much easier to get credit these days with people borrowing for day-to-day requirements – not just mortgages
• Education (e.g university) used to be free.  These days, lots of Generation Xers are financing their children’s university fees and students loans

65% of Generation Xers believe they will not have enough income to enjoy retirement.

Reasons :

• Generation Xers do not adequately save whilst the children are growing up.  Generation Xers have more expensive cars, bigger houses and foreign holidays.
• By the time children leave home, there is a limited amount of their working life remaining to save fully for their retirement.
• With longer life expectancy, pension pots at retirement now generate less annual income than previously.

( c ) 6% have made no plans at all.  Most of these are relying entirely on inheriting directly from their parents.

The danger of this is the uncertainty of the timing of inheriting and the amount of inheritance as a result of :

• An ageing population where life expectancy is considerably longer than it was 30-40 years ago.
• Long-term healthcare costs, on average, £29,000 per year which significantly eats into the estates of those inheriting.

 

Recommendations/advice

It is essential that Generation Xers recognise these problems as early as possible and take action which can include the following :

• Start saving and planning for retirement much earlier.
• Obtain professional help and advice in relation to financial planning and financial matters.
• Review existing assets to explore options for maximising potential for the future.
• Understand the tax implications of certain assets and how this can affect the future, e.g the family home is likely to be exempt from capital gains tax in the event of a sale and downsizing can provide additional capital later in life.
• Beware the pitfalls and additional tax on buy-to-let property investments, e.g. extra 3% Stamp Duty on purchase, capital gains tax at 28% and tax relief restricted on mortgage interest.

 

As for the millennials – you have much more time to plan so take action now.

Contact your local Perrys branch to discuss any of the above.

Article written by Declan McCusker