What the evolution of wealth management means for Generation X and retirement

A recent financial literacy study from Investopedia shows Generation X (or Gen X) is invested in—and concerned about—retirement. Currently between 44 and 59 years old in 2024, Gen Xers recognize that it’s time to get serious about retirement savings. 

The study showed the top 3 worries for Gen Xers are retirement (21%), followed by saving money (13%) and digital currency (13%). The recent climate of inflation, rising cost of living and stagnant wages are a part of that. As were their lived experience and cultural upbringing. 

Whether you’re an older Millennial who identifies with Gen X or you fall squarely within the so-called “forgotten generation,” one thing is clear—the financial planning and retirement saving strategies your parents relied on may not serve you well today. With longer lifespans and rising costs of living, planning for your retirement and your legacy requires a modern approach. As markets fluctuate and technology transforms, the old rules no longer apply. 

So what does the evolution of wealth management mean for Generation X?

The evolution of wealth management from 1980s to mid 2000s

“Greed is good.” – Gordon Gekko, “Wall Street,” 1987

Gekko’s famous quote from the film embodies the investment ethos of the 1980s and 90s. Reportedly, the character played by Michael Douglas was an amalgamation of real-life intrepid Wall Street traders. Despite some challenges, like the 1987 stock market crash and the 1991 recession, it was an economic boomtime. Inflation was down, jobs were up, GDP was growing, and the U.S. seemed unstoppable as a world superpower.

In this era, many people handed their wealth and money management over to large brokerage firms and investment advisors. As a client, you had limited options, and little input or control over investment decisions. Fees were also higher, with advisors taking big commissions on trades and products sold. And the concept of long-term financial planning was nearly unheard of. 

Changing tides at the turn of the century 

By the time younger members of Gen X began entering the workforce, things were changing. After the unprecedented worldwide growth of IT and telecom throughout the mid-1990s, the dot-com bubble imploded in March 2000. 

Followed by September 11, 2001 and the Great Recession (housing market crash) of 2008, many Gen Xers experienced repeated, significant blows to their earning power—and their financial confidence. Many lost their jobs or had their retirement accounts depleted, forcing them to delay major life milestones. 

Through all these hardships, the “Greed is good” mentality slowly gave way to a more conservative, risk-averse approach to investing. The 2008 financial crisis shook public trust in big banks and led to more stringent regulations in the financial sector. 

As a result, individuals became more cautious about speculative investments and day trading of individual stocks. The focus moved from big, short-term wins towards building a more resilient and balanced investment portfolio. Wealth management became more about building a long-term plan to manage risk and weather economic storms effectively.

The unique financial challenges of Generation X

A combination of life stage, history, technological advances, and changing cultural tides presents unique financial hurdles for Generation X. 

For one, market downturns during formative earning years can have a lasting impact on your finances. Instead of accumulating wealth, many Gen Xers were paying down debt or rebounding from financial losses. 

Besides impacting job security, these crises led to other challenges in long-term stability and retirement planning. If you identify with Gen X, you may have seen one or both parents work the same job for 25 or 30 years, and then retire comfortably on a company pension. Now, those days are all but gone.

Until the 1980’s, defined-benefit pensions were the most popular employer-sponsored retirement plan.Today, only 10% of private industry nonunion workers have access to one, according to the Bureau of Labor Statistics’ (BLS) March 2023 National Compensation Survey. 

As 401(k)s and other individual retirement accounts replaced traditional pensions, Gen Xers were the first generation to bear the shift towards self-managed retirement savings. But without guidance and financial education, many failed to maximize these accounts, and missed out on a major saving opportunity. 

These factors—coupled with today’s stagnant wages, rising costs, and concerns about the future of Social Security—have caused a financial drag, making it tougher for this group to save for retirement. Today, Gen X has the most credit card debt of any adult generation.They also carry the highest student loan debt at an average of $44,290 per borrower.  

If you’re in your mid 40’s or 50’s now, you may find yourself sandwiched between your own bills, raising your own kids, and possibly caring for your aging parents. Managing midlife expenses while also saving for retirement can feel daunting, but it’s possible with the right planning and support.  

Reinventing retirement for Gen X: current and future trends in wealth management

Wealth management in the 21st century is evolving, thanks to advances in technology, information sharing, and society’s shifting attitudes. Here’s what the future could look like for Gen X and future generations.

Gen X focused on stability and wealth preservation

Gen Xers approaching their 50’s and 60’s know it’s now or never when it comes to saving for retirement. The Investopedia study found that while this generation is generally confident about handling day-to-day finances, their financial future is a primary concern.

According to the study, more than half of Gen Xers have some sort of investment portfolio (59%) and plan to draw retirement income from a mix of traditional sources, like Social Security, 401(k)s, IRAs, and their portfolio mix of stocks and fixed income.  If you’re among this group, now is the time to maximize contributions to your tax-advantaged accounts to get the most out of these traditionally higher earning years.  

Alternative investments are diversifying Gen X’s investment portfolios

Along with “old school” stocks, ETFs and mutual funds, Generation X are diversifying their portfolios with alternative investments.

• 1 in 4 (28%) have purchased cryptocurrency such as Bitcoin or Ethereum.
• Generation X made up 24% of total homebuyers in recent years, and they’re also the most likely generation to own additional properties for investment or vacation purposes. 
• Nearly 1 in 5 adults (19%) are in the process of founding a business or have done so in the past 3.5 years, and many plan to use business equity as a form of retirement income.

Technology opens up new options for everyday investors 

Online investment platforms, robo-advisors, and AI-powered planning tools are reshaping the wealth management industry. Tools like Betterment and Wealthfront use algorithms to build and manage portfolios with little to no human intervention. While these platforms can be cost-effective, they lack the personal insight of an advisor, who can help you with specific goals, challenges, and opportunities.  A human advisor gets to know your situation and can help you pivot as life changes come your way.  

Changing perceptions of retirement 

Retirement is becoming less synonymous with being unemployed and playing golf or bridge. Current and future retirees are looking for flexibility with both time and money—which may look like multiple careers, starting a side business, or working part time with breaks in between. 

Growing interest in ESG (Environmental, Social, and Governance) 

Gen Z and Millennials are often credited with driving growth in the ESG sector. But NASDAQ found 16% of Gen X “often or exclusively use investment products that take ESG factors into account”. And information from Allianz’ ESG Investor Sentiment Study showed 64% of Gen Xers are more likely to make purchasing decisions that align with their values.

Taking the long view 

Healthcare costs are up, and so is human longevity. The potential of living until 95 means you need a plan for insurance, including long term care. And you need financial strategies that will sustain you for decades, not years. 

The shift towards personalized, client-centric service

Most of today’s wealth managers won’t try to sell you penny stocks or productized packages for a kickback. And the ones who do are easy to recognize—if you know what to look for. 

A fiduciary or fee-only advisor is legally bound to put your best interests first. Fee-based or “dealer-broker”, on the other hand, indicates there may be commissions involved for recommending specific products. 

A fee-only advisor will get to know you and your situation—retirement goals, risk exposure, life span, health, priorities, family structure, everything. And then you get a tailored plan according to your goals and priorities.

If you started late, they can help you get caught up. If you have a big purchase coming up or a career break planned, it doesn’t have to derail your financial future. Personalized planning is about more than just an algorithm or the numbers in your account. 

This is not your father’s retirement plan. The modern approach to retirement planning is more nuanced, more transparent, and more personalized. For Gen Xers, that could mean:

• Diversifying your investments to hedge against a downturn
• Planning to balance mortgage payments with college tuition
• Modeling costs to buy an investment property
• Setting a course to maximize your tax-advantaged contributions in the next 5 – 15 years
• An estate plan to provide for your loved ones (and save them money)
• Considerations for business owners, career pivots, and semi-retirement  
• Ongoing tax planning (instead of just stressing at tax time) 
• Regular check-ins to keep you on track, review goals and life changes, and rebalance accordingly

You know retirement is the goal, but how? If you’ve asked yourself this question, you might benefit from talking to a financial advisor. Contact one of our Certified Financial Planners™ to learn more.  

Download our free MIDLIFE PLANNING checklist. See where you stand in 7 key planning areas now, so you can get where you want to be in retirement.