How Generation X Became the Sandwich Generation

Reality still bites for Generation X. They’re getting close to retirement age, and are being out-saved by everyone else. But, it may not entirely be their fault. Many have kids and parents to take care of first. That makes them a part of another generation: The “sandwich generation.”

Fifty-five percent of Gen X believe they’ll be able to retire comfortably, according to the Transamerica Center for Retirement Studies (TCRS).^[1] Meanwhile, 62 percent of baby boomers and 67 percent of millennials feel they will. To make matters worse, a third of Gen X says they have no money saved at all for retirement, according to a study from wealth management firm Personal Capital.^[2]

That raises the question: Why are Gen Xers struggling to save money? We’ll breakdown what’s holding back their retirement in a minute, but first here’s why many are a part of another generation…

What is the sandwich generation?

Many of Gen X fall in the age group called the “sandwich generation.” And what that term refers to is middle-aged people who have found themselves taking care of their children and aging parents. Some of this group are younger boomers, but predominantly it’s Gen X.

Some have younger kids, others – adult children. Many had millennial children who took out loans to go to college, graduated with heaps of student loan debt, and boomeranged back to their parents’ homes.

With aging parents and school-age children, Gen X is the most likely generation to support others.

Jonathan Walker, executive director for The Center for the New Middle Class

A 2017 report from investment company Elevate called The Center for the New Middle Class revealed findings that Gen Xers, those born between 1965 and 1980, belong to the “least likely” generation to save money at a time in their lives when prior generations were well on their way to getting their finances in order.^[3]

“Gen X should be at a stable point in their lives, buying homes, sending kids off to school, becoming empty nesters,” says Jonathan Walker, executive director for The Center for the New Middle Class. “With aging parents and school-age children, Gen X is the most likely generation to support others.”

The kids are growing up and over the course of 17 years, they’ll cost their parents about $234,000. And the cost of tuition isn’t that much better. Teenagers aren’t so sure their parents can afford college tuition either and are trying to put away the cash themselves, Debt.com has reported.

Meanwhile, aging parents promise to cost nearly $140,000 over a much shorter stretch, the Urban Institute reports.^[4] Then, of course, they’re just getting back on their feet from the recession — a hit that put them behind in savings and equity in their homes.^[5]

“It is rough trying to take care of a parent and kid at the same time,”  Debt.com reader Ray Jensen says in a Facebook comment thread. “I just had my wife having tonsil surgery, kid broke her arm and got the flu. Mom needs a nursing home and my car broke all at once.”

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The Great Recession’s impact on the sandwich generation

Gen Xers are nearing their 40s or 50s. You’d think this generation would ease into retirement in another decade or two. But that may not be true.

Being a part of the sandwich generation may explain why 37 percent say they won’t be able to retire. Despite the fact that they’d like to stop working today, many don’t believe they can afford to, says a study from TD Ameritrade reported in USA Today.^[6] The following are some of the financial problems Gen X is running into…

• Behind on savings: 43 percent
• Worried about running of out of money once they leave the workforce: 49 percent
• Aren’t saving for, or investing in anything: 17 percent
• Expect to be “very secure” in retirement: Only a third, compared to nearly half of boomers

The Great Recession hit Gen X hard. In fact, it’s the generation more likely than millennials and boomers to say they “may never recover” or have “not yet begun to recover” from it, according to a CNBC report.^[7#]

“Our generation got screwed over,” says Matt McCain, another Debt.com reader, in a Facebook comment thread. “The recession, 10 years ago, all but evaporated our jobs and careers during our prime working years.”

McCain continues: “Those of us that were lucky got to keep their homes and didn’t get foreclosed on. So now we’re stuck 10 years behind trying to catch up while fighting the effects of getting old.”

Generation X vs millennials: mortgages

The recession also struck Gen X’s home equity balance harder than other generations.

The housing crash is more than a decade in the rearview. Yet still, Gen X homeowners are behind in the race to gain equity in their homes. The generation owes 70 percent of their home’s value. That’s according to a 2017 report from Zillow that tracked the home equity of more than 50 million homeowners with a mortgage and parsed the numbers by generation and location.^[8]

Millennials have already amassed nearly the same amount of equity as Gen X. Despite having less time to do it, millennials typically owe about 76 percent of their mortgage.

“Paying off the home mortgage is a key step toward retirement for most Americans,” says Zillow chief economist Svenja Gudell. “It’s clear from these results that Gen X is further from that goal than older generations because of the Great Recession.”

Generation X can still retire – but it’s going to take work

Because so many Gen Xers went through the recession, 51 percent say they save more now as a result.

Members of Gen X are heading into their peak earning years. Gabriel Garcia, an executive from investment service company Pershing Advisor Solutions opined through CNBC that “it’s high time Gen X takes retirement seriously.”^[9]

Gen X should see an increase in income and savings over the next 12 years, according to Deloitte Consulting.^[10] The generation held 14 percent of the total net wealth in the U.S. in 2015. By 2030, financial experts at Deloitte predict Gen X to hold 31 percent and overtake boomers as the wealthiest generation.

Forty percent of Gen X say they’re procrastinating their retirement savings, says a 2016 study from TCRS.^[11] That’s compared to 28 percent of boomers, and 52 percent of millennials — who have plenty of time left to save. To pull off a successful retirement, Garcia suggests members of Gen X acknowledge their financial situations and make a plan.

“Retirement planning requires a good amount of discipline and dedication — not to mention many trade-offs,” Garcia writes. “As Gen Xers enter their top earning years, there is no better time to begin planning for retirement than now.”