How 'Generation X' is on track for tough retirement
Bad timing and bad investments mean working later in life
Published 10/08/2014 | 02:30
"TEN years ago I thought I would be quite comfortable by now - but I know I'll work until I'm at least 70 - maybe until I die."
Like many of his generation, 45-year-old Michael Fitzpatrick* is struggling to get by. The prospect of a lean retirement looms large, that's if he can ever fully retire at all. He's one of the large cohort they call Generation X.
Roughly aged between 35 and 55, they tend to be better educated and qualified than their parents' generation, but saddled with massive mortgages, disappearing job security and an uncertain financial future. Many bought investment properties - bricks and mortar in place of a pension pot. For the group that could be renamed 'Generation Negative Equity', the financial future looks bleak.
Like so many of his contemporaries, Mr Fitzpatrick's financial troubles began in 2008. Wage cut after wage cut eventually halved the construction manager's salary and he began to fall behind on household bills - including two hefty mortgages. When Mr Fitzpatrick was made redundant in 2011, his family, including three children under 12, depended on social welfare and his wife's small part-time income to survive.
"It got to the point where no bills were being paid at all. We could barely put food on the table most of the time. We were getting calls from the banks every day," said Mr Fitzpatrick. Barely scraping by means never being able to plan more than a couple of days or weeks ahead - a long-term savings scheme soon plummeted down the family's list of priorities.
Feeling he was running out of options, Mr Fitzpatrick considered emigrating. "I thought seriously about moving to the UK to look for work, but I really didn't want to move my family." He contacted money advice service Mabs, but demand was so great at that time that he said he was told it would take six months to get an appointment.
Mr Fitzpatrick eventually won a place on a retraining scheme and is now in steady employment in the resurgent construction sector. But while he has managed to claw his way back from the edge of his own personal fiscal cliff, financial stability and any prospect of a cushy retirement are non-existent.
He has a very small pension, he made minimum contributions to before being let go, but little else. "I have an investment property in serious negative equity that I will never be able to pay off - even if I'm reincarnated."
The CEO of the Irish Association of Pension Funds, Jerry Moriarty, said anecdotal evidence suggested that Mr Fitzpatrick's situation was far from unique. "We've seen quite a significant drop-off in people paying into pensions over the last few years."
He said many people felt they had no choice but to stop saving. "During the recession many employers froze pension contributions as a last-ditch measure and employees were willing to except this rather than lose their jobs. Now there are a lot of people who are so focused on getting by day-to-day that they're not planning for the future."
The only saving grace in the Fitzpatrick family's situation is that their family home is not in negative equity.
"I hope to clear the mortgage by the time I'm 70 so we can sell and downsize - that will be my pension," said Mr Fitzpatrick. "Two years ago I was in a very dark place. Things are much better now, but my wages only just about cover bills every month."
Mr Fitzpatrick has reluctantly accepted his new reality.
"Sometimes I still get upset and disappointed. I feel at this stage of my life I should be in a much better situation. I start work at 7am every morning and don't get home until 7pm. I'm starting to feel the physical grind, but I refuse to let it get me down - the only person who is going to help me is me."
While Michael Fitzpatrick still has over a decade to turn his situation around, Colm O'Hanlon* and his wife are on the older side of Generation X. At 59, the age where their parents were looking forward to retirement, O'Hanlon is convinced they will have to work until they die.
"There's no chance in hell we can do anything else." The former airport worker is about to find himself unemployed for the second time in six years. A succession of wage cuts left him earning €12 per hour at his last job - not enough, he said, to pay for the petrol needed for his two-hour round-trip commute.
O'Hanlon managed to find a new job as a sales rep, but said he expected to be let go next month. "We have a €230,000 mortgage on a house in negative equity. If I can't get another job we'll have to sell our home and move in with family."
The O'Hanlons have been on the brink of losing their home before. They turned to financial advisory firm MoneyBloom, which helped strike a deal with their bank and enable them to keep their house.
MoneyBloom adviser Clare Dooley said Generation X had felt the effects of the recession the hardest. "The majority of our clients are aged between 40 and 60, and negative equity is their biggest financial liability. When the financial crisis hit and people found themselves under severe pressure, insurance and pension plans were often the first bills to go unpaid," she said.
But Dooley said even those in dire financial straits could still plan for the future. "Unsecured lenders can insist that those struggling to service debt reduce pension contributions, but many mortgage lenders are willing to work with borrowers and will eventually write off debt once a payment plan is in place. We find that many people have been badly advised and are not actually in as bad a position as they think. It is possible to deal with massive debts and still plan for the future," said Ms Dooley.
Jerry Moriarty said he agreed. He said it was always possible to start saving something for old age. "Many people only start to think about their future when they hit their 40s. That is late, but it's always better to start than not."
For those edging closer to retirement without a plan, Moriarty said it was time to take action. "Save something - anything. Saving for the future isn't as scary as it seems."
Mr O'Hanlon credited MoneyBloom's advice with saving his life, but said he's still angry at the situation he's facing as he gets older. "We don't have a car. Any small expense, like a kettle breaking, is a disaster. We've paid our way all our lives and now are left like this - while bankers have walked away scot free."
While Generation X is feeling the pain right now, Ireland as a whole is in need of a better pension plan. According to the CSO, the number of people over 65 is set to grow from 532,000 in 2011 to almost 1.4 million by 2046. Only around 40 per cent of private sector workers have any pension provision beyond the State old age pension, which is just under €12,000 per year. From 2028, the age at which the state pension will be paid will rise to 68. But if current trends aren't reversed its likely the children and grandchildren of Generation X will have to work much harder for much longer.
*Names have been changed to protect privacy
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