(Mises Institute)—French philosopher Auguste Comte (1798-1857) is purported to have said that, “Demography is destiny,” meaning that a country’s future is determined by the size and age distribution of its population. The concept also helps explain how individuals within a given generation fare throughout their lives.
America’s Generation X includes those born from 1965 through 1980, now aged 45-60. They number 65 million individuals, representing 19.5 percent of the entire US population, somewhat fewer than those in the older Baby Boomers at 20.9 percent, or the younger Millennials at 21.7 percent. They are now entering leadership roles in public and private sectors of the economy, and are often caring for both their children and their own aging parents. Some are sending their children to college at historically-inflated tuition levels for what is increasingly questionable indoctrination rather than genuine education. The oldest of the group are in their peak earning years, contemplating their retirement in a few short years, while the youngest may be just becoming aware of the importance of retirement planning.
A Shift in Pension Plans
The transition from defined-benefit pension plans to defined-contribution 401(k) plans occurred during Gen X’s working years, uniquely affecting the generation’s retirement planning. Both types of pension plans typically deduct employee contributions from paychecks, sometimes matched by employers, but the similarity ends there.
Traditional defined-benefit plans entrust these retirement monies to employer pension managers who invest the funds to generate sufficient funding to pay the promised pensions. Thus employers bear the risks associated with investing the retirement funds. Defined-contribution plans, on the other hand, allow employees to self-direct their retirement funds, usually within employer-approved investment options. These plans place investment risk on employees. Most Gen X individuals entered the labor market during the economy-wide transition from defined-benefit pension plans to defined-contribution 401(k) accounts.
Some defined-benefit plans, especially in the public sector, are struggling with sizable unfunded liabilities, meaning that the plans have promised more pension benefits than they have in reserves to pay these benefits. This means that employers—that is, taxpayers in the case of public sector retirement plans—will have to cover the shortfall in order to pay the promised benefits. Courts have typically found defined-benefit plans to be contractual obligations that cannot be altered if employers have unfunded liabilities.
Gen X’s experience demonstrates that significant changes in employer practices and federal law can affect the wherewithal of an entire generation of Americans. The two primary laws that affect 401(k) plans are the Employee Retirement Income Security Act (ERISA) and the Setting Every Community Up for Retirement Enhancement (SECURE) Act. ERISA—passed in 1974—outlines the rights of consumers whose assets are invested in retirement accounts, including 401(k) accounts. The SECURE Act—passed in 2019—is intended to encourage retirement savings and provides annual increases in employees’ tax-free contributions to 401(k) accounts.
As a generation so directly impacted by the transition from one retirement paradigm to another, Gen X-ers missed out on some of the automatic features in the early days of 401(k) plans, such as automatic enrollment at time of employment and annual increases in deferred contribution limits.
Recent Surveys of Gen X Reveal Conflicting Results
It is not entirely clear how prepared for retirement Gen X-ers may be. On the one hand, the 2024 Annual Retirement Study from Allianz Life Insurance Company of North America reveals some disconcerting results on Gen X’s retirement saving and on retirement itself:
- Many of the Gen X-ers surveyed say that they can’t afford to retire at 65; and a quarter of those without a 401(k) account don’t expect to ever retire at all
- 44 percent say they currently have a plan for how they will take income in retirement
- 48 percent worry they will be forced to live too frugally and not enjoy retirement as much
- 45 percent worry about how to best take distributions from their retirement savings for income during retirement
- 35% worry that they will outlive their retirement plan assets
- Nearly half have done no retirement planning
- They predict they will need an average $1,069,746 in savings in order to retire comfortably, yet they expect to have just $602,944 saved by then
On a more positive note, the Bank of America Institute has found that, although Gen X discretionary spending has been weak compared to that of other generations, Gen X-ers are saving more as they age. Interestingly, Gen X’s investments per household are now 40 percent higher than those of the overall population.
Social Security: The Elephant in the Room
In addition to their employment pensions and other retirement savings, Gen X-ers hope to receive some Social Security benefits—as those in previous generations have and future generations should anticipate having. Yet—with the projected insolvency of the Social Security Trust Fund and resulting reductions in benefits within ten years if Congress fails to act—the retirement survey findings summarized above are disconcerting. While Social Security was never designed to provide all of America’s retirement needs, it has for nine decades provided a backstop to prevent poverty among retired seniors.
Social Security is best viewed as an intergenerational redistribution of income from younger working Americans to older retired Americans, accomplished with a 6.2 percent payroll tax levied on all earned income up to an annual wage-base limit, $176,100 in 2025. Employers are similarly assessed at 6.2 percent of their employees’ earned income. Those who are self-employed must pay both their own 6.2 percent payroll tax and the 6.2 percent employer tax, a total of 12.4 percent, since they are effectively their own employers.
Payroll tax revenues go into the Social Security trust fund, where they are then directly disbursed as benefits to eligible retired individuals. For this reason, some have cynically described Social Security as a Ponzi scheme, in which the later contributors (younger working generations) are taxed to pay for benefits paid to earlier contributors (older Americans receiving benefits).
Misconceptions about Social Security
Social Security was never designed to be a pension plan, yet employees contribute to the program during their working years as they might to a proper pension plan. Employees could probably have accumulated more retirement funds through a defined-contribution plan than with a mandatory Social Security payroll tax, but the program has historically conveyed to the nation an appealing aura of shared social welfare.
After his re-election in 2004, George W. Bush announced his support of individually-managed accounts within Social Security, similar to 401(k) accounts, but the public response to individual accounts was so negative that he never pursued it in his second term, nor have subsequent presidents followed up on the notion.
Paying the payroll tax is a necessary, but not sufficient, condition to receive Social Security benefits. A 1960 Supreme Court decision in Fleming v. Nestor clarified that Social Security was meant to be a form of long-term social insurance, not a contractual government benefit, therefore, merely having contributed payroll tax does not entitle an individual to benefits. It had been—and still is among many Americans—a common misconception that paying the tax is sufficient to receive benefits, but the 1960 decision still governs, and the Court has never revisited the matter.
Gen X and Social Security
If Congress takes no action, the projected insolvency of the Social Security trust fund will affect Gen X. The oldest of the generation—born in 1965, currently age 60—will be eligible to apply for benefits at age 62 in 2027. The youngest Gen X-ers will not be able to apply until 2042. Benefits for all generations could be reduced by about 25 percent, imposing hardship on many seniors.
Elected officials remain mum on plans to assure Social Security’s future viability. The 2024 presidential candidates vowed not to cut benefits, yet offered no plans such as increasing the benefit eligibility age, revising benefit calculations, or increasing the payroll tax, measures most recently taken by the Reagan administration in 1983 to assure Social Security’s future. One can make an educated guess that—rather than overseeing a 25 percent benefit reduction—most politicians would opt to fund benefits from general tax revenues if the trust fund is inadequate. This would require Congressional action.
Once again, comparable to the transition from defined-benefit pension plans to defined-contribution 401(k) plans, Gen X will likely be affected by political action to assure the future of Social Security. Such is the fate of Gen X-ers as the old adage that “demography is destiny” impacts their lives in real time.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.