Certified Financial Planners are dicing your lifetime into five categories these days, even as psychologists spend decades trying to do the same. A recent issue of the magazine sought to describe the 20-somethings as a segment of life all their own calling them pre-adults, suggesting that they live in a time “what one sociologist calls “the changing timetable for adulthood.” Sociologists traditionally define the “transition to adulthood” as marked by five milestones: completing school, leaving home, becoming financially independent, marrying and having a child.” What Robin Marantz Henig reported was quite different that the pat description we often think about when we look at this segment of the population.
These kids are moving home, picking and choosing which transition period they are in and otherwise driving their parents crazy with thier lack of forward movement. They seem to be drifting without aim. Granted, this doesn’t describe the whole of this age group. But it does tend to encapsulate a generational time where they are finding fewer jobs available, more opportunities to spend time researching their futures and developing the maturity needed to step into the next phase of life.
Which is why, when Certified Financial Planner Board of Standards tries to categorize the we-must-work-longer approach to retirement planning, the way they address the youngest in this group, seems far removed from the reality of the situation. This group is not the “failure to launch” crowd many parent use to describe their children; it is the “failure to even want to get to the launching pad” time of life that can frustrate parents who are trying to plan for their own future.
This is new category that has put pressure on well-laid out plans developed by parents who see the old school timetable these CFPs continue to embrace. Often referred to as the sandwich generation, parents caught between kids who haven’t done anything more than rack up college debt, moved back home to discover what they want to do and are otherwise draining day-to-day costs that their parents should be putting away for their own future and their parents, who have found the future not as accommodating as they had planned.
This doesn’t mean you should throw your hands up in frustration and not invest. It means that, as long as this shift is in place, those investments will come with additional sacrifices. Eleanor Blayney, the CFP board’s consumer advocate acknowledges these issues but chooses instead to fall back on the limit debt, work on prudent handling of credit and “getting off on the right foot” which she points out “can impact their ability to build and accumulate wealth throughout their lives.”
The real questions is how to get the spend-what-I-earn generation to save for a future that even this group is suggesting will be far longer than their parents anticipate. Should you invest for them? The simple answer would be yes. The obvious answer would be: “only after you have financed your own future”.
Social and economic shifts in the 21st century demands a new categorization of these “emerging adults”, much like, as Henig points out, we did at the turn of the last century when we coined the phrase adolescence. Although we can slice and cie our population in any number of additional ways, the real focus is on when you are grown up enough to see far into the future. And when you do, you realize at the moment, you aren’t investing enough because there simply isn’t enough left over to do so.
The CFPs still believe that ages 40-55 are the wealth building years when more discretionary income is available. For some it might be. Threatened with the advice about “getting it right” because there are fewer chances to correct the missteps you may have already made or are about to encounter is easier said than done. This age bracket assumes you started young, continued to be money prudent through your nesting years, and you reached this time of life understanding that your age of consumerism is over. But in reality, we have little interest in ceasing spending, instead redefining what make our lives worth living. Nowhere does it suggest that we redefine luxuries over necessities.
Somewhere along the line, we have to ask the person in the mirror who we are. Will we be defined by the mistakes of the past or instead, invent a future that is achievable? One, unfortunately births the other.
Yes we should be investing more of our income as we age. By the time we hit 40-years-old, 10% of what we earn should be headed into our retirement accounts. By the time we are 50-years-old, we should have incrementally increased that to 15%. How we should invest those dollars depends on whether you embrace the new we-will-live-longer message being sent to all of us through a wide variety of financial channels. If 75 is the new 65, we should quite possibly be treating those retirement accounts with a higher degree of risk that we currently are being advised to do. And if your 20-something hasn’t started to invest for their future, if those estimates hold true, they have over fifty years to correct this time of life.
Needless to say, slicing and dicing a retirement plan is a nice parlor game for CFPs to play. But in practice, it offers little to the discussion.
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The Sliced and Diced Retirement Plan
Certified Financial Planners are dicing your lifetime into five categories these days, even as psychologists spend decades trying to do the same. A recent issue of the magazine sought to describe the 20-somethings as a segment of life all their own calling them pre-adults, suggesting that they live in a time “what one sociologist calls “the changing timetable for adulthood.” Sociologists traditionally define the “transition to adulthood” as marked by five milestones: completing school, leaving home, becoming financially independent, marrying and having a child.” What Robin Marantz Henig reported was quite different that the pat description we often think about when we look at this segment of the population.
Which is why, when Certified Financial Planner Board of Standards tries to categorize the we-must-work-longer approach to retirement planning, the way they address the youngest in this group, seems far removed from the reality of the situation. This group is not the “failure to launch” crowd many parent use to describe their children; it is the “failure to even want to get to the launching pad” time of life that can frustrate parents who are trying to plan for their own future.
This is new category that has put pressure on well-laid out plans developed by parents who see the old school timetable these CFPs continue to embrace. Often referred to as the sandwich generation, parents caught between kids who haven’t done anything more than rack up college debt, moved back home to discover what they want to do and are otherwise draining day-to-day costs that their parents should be putting away for their own future and their parents, who have found the future not as accommodating as they had planned.
This doesn’t mean you should throw your hands up in frustration and not invest. It means that, as long as this shift is in place, those investments will come with additional sacrifices. Eleanor Blayney, the CFP board’s consumer advocate acknowledges these issues but chooses instead to fall back on the limit debt, work on prudent handling of credit and “getting off on the right foot” which she points out “can impact their ability to build and accumulate wealth throughout their lives.”
The real questions is how to get the spend-what-I-earn generation to save for a future that even this group is suggesting will be far longer than their parents anticipate. Should you invest for them? The simple answer would be yes. The obvious answer would be: “only after you have financed your own future”.
Social and economic shifts in the 21st century demands a new categorization of these “emerging adults”, much like, as Henig points out, we did at the turn of the last century when we coined the phrase adolescence. Although we can slice and cie our population in any number of additional ways, the real focus is on when you are grown up enough to see far into the future. And when you do, you realize at the moment, you aren’t investing enough because there simply isn’t enough left over to do so.
The CFPs still believe that ages 40-55 are the wealth building years when more discretionary income is available. For some it might be. Threatened with the advice about “getting it right” because there are fewer chances to correct the missteps you may have already made or are about to encounter is easier said than done. This age bracket assumes you started young, continued to be money prudent through your nesting years, and you reached this time of life understanding that your age of consumerism is over. But in reality, we have little interest in ceasing spending, instead redefining what make our lives worth living. Nowhere does it suggest that we redefine luxuries over necessities.
Somewhere along the line, we have to ask the person in the mirror who we are. Will we be defined by the mistakes of the past or instead, invent a future that is achievable? One, unfortunately births the other.
Yes we should be investing more of our income as we age. By the time we hit 40-years-old, 10% of what we earn should be headed into our retirement accounts. By the time we are 50-years-old, we should have incrementally increased that to 15%. How we should invest those dollars depends on whether you embrace the new we-will-live-longer message being sent to all of us through a wide variety of financial channels. If 75 is the new 65, we should quite possibly be treating those retirement accounts with a higher degree of risk that we currently are being advised to do. And if your 20-something hasn’t started to invest for their future, if those estimates hold true, they have over fifty years to correct this time of life.
Needless to say, slicing and dicing a retirement plan is a nice parlor game for CFPs to play. But in practice, it offers little to the discussion.
Related posts:
Posted in commentary, financial planning, personal finance, Repercussions: A Retirement Review, Retirement Planning Target 2025