Gen X, Gen Y, debt, and savings

This USA Today story kind of misses the whole point about Gen Xers by starting out with a 30-year old lawyer and his soon-to-be MBA wife who are struggling with college debt.

Generally defined as those individuals now 27 to 43 years old, Gen Xers are far better represented by the millions of 40-year old spendthrifts who are just now realizing that their home isn't going to do all the heavy lifting for their retirement savings.

Of course, the current problem for all generations is the debt that they have all accumulated and Gen Y - from 11 to 25 years old - may be best prepared for the future simply because they've had less time to borrow and spend.

"One of the biggest issues facing the Gen Xers," observes Pam Hess, director of retirement research at Hewitt Associates and a Gen Xer herself, "is lots of competing priorities, juggling lots of different costs and financial priorities. It will continue to be a struggle."

Consumer debt is one of the main reasons. Nine out of 10 consumers in their 30s are in debt, compared with 76% of those in their 20s, according to the Federal Reserve's Survey of Consumer Finances. In a recent Charles Schwab study of more than 2,000 Gen Xers nationwide, 45% of respondents said they had too much debt to think about saving.

Gen Xers also are the first generation to graduate from college with significant student loan debt. About 20% of adults in their 30s are still paying college loans, according to the Federal Reserve study; the median balance exceeds $13,000. Yet, even as Gen Xers continue to grapple with college debt, experts tell them they need to be putting aside money for retirement, as well as for college savings for their children.

While it it true that college debt is much more significant than, say, 20 years ago, the twenty-something that duly saves for retirement is an odd-bird indeed. What little discussion of retirement planning you get while still in or just out of school seems to go in one ear and out the other and understandably so.

Who wants to think about retirement when you've just started to work?

However, if you're not beginning to think about long-term financial planning by your mid-thirties or early-forties at the latest, then you are setting yourself up for a big disappointment later in life, which is basically what most people are going to get.

While an excellent development for the bottom lines of corporations, replacing fixed benefit pensions with fixed contribution 401ks and IRAs is not the way to ensure sound retirements for the many millions of Americans who have become accustomed to spending more than they earn.