High school yearbooks don’t say which students are “most likely to make terrible financial decisions.” But if they did, a recent report could predict what those mistakes would be, based on when the person graduated.
Every generation has a “pain point” when it comes to their finances, according to a new report from Financial Finesse, a financial education company. For example, many Generation X employees, it says, need to re-evaluate their retirement plans with the expectation of lower Social Security payouts, increasing health-care costs, reduced employer benefits, and longer life expectancies than baby boomers.
The good news: The majority of large organizations are now using automatic features in 401(k) plans to help employees save for retirement, says Liz Davidson, CEO and founder of Financial Finesse. The study asked millennials (born roughly between 1981 and 1996), Generation Xers (born between 1965 and 1980) and baby boomers (born between 1946 and 1964) about their financial management skills.
All the respondents in the survey — over 11,300 in total — are working in jobs with annual salaries of $20,000 to $200,000. The participation in retirement plans in this survey will likely be higher than the national average as these employees get a significant amount of education and help with their benefits, partly because they are working in companies that are clients of Financial Finesse. What’s more, many of these employees are using automatic enrollment in retirement plans.
Younger generations don’t always think of mortality. “Not having enough life insurance is easy to overlook,” says Neil Krishnaswamy, a financial planner at Exencial Wealth Advisors in Plano, Texas. “I recommend term life insurance of at least $1 million for the highest earner.” Workers with a high-deductible health plan should have a health savings account, which also lowers your taxable income.
Here are the three biggest mistakes made by each generation: