Financial planning is difficult in the best of times — and 2022 is definitely not the best of times. A number of factors — namely rising interest rates, high inflation and a volatile market — have come together to create what Goldman Sachs is calling a “financial vortex” that is catching many Americans in its wake, especially those in the “sandwich generation” of Gen Xers who are currently dealing with both aging parents and raising children.
If you need help navigating the financial vortex, consider working with a financial advisor.
Elements of the Financial Vortex
There are three basic elements of the financial vortex:
- Rising interest rates. After being reduced drastically during the COVID-19 pandemic, the Federal Reserve has been raising interest rate throughout 2022 — and it seems likely they will continue to go up more. The Fed has been raising interest rates as a way to fight inflation, but there are a number of consequences from this action. At the macro level, it may drive the U.S. economy into a recession. At the micro level, Americans looking to buy homes or borrow money for other reasons face big interest payments.
- High inflation. Inflation is up more than 8% over the past year, the biggest jump in decades. This is causing big price increases for American families, including for necessary purchase like food.
- Market volatility. After a nearly decade long bull market, things are looking rather bearish on the markets. This means investments are losing values, including 401(k) portfolios.
All of these factors have come together to create the financial vortex, leaving Americans struggling to get by today and especially to plan for tomorrow.
“The financial vortex is the new reality for retirement savers today,” said Mike Moran, Senior Pension Strategist at Goldman Sachs Asset Management, in a press release. “Some challenges are common life events, such as buying a home or starting a family, but market volatility and high inflation are beyond individual control. It’s not a question of if, but when someone will be impacted. Knowing how to adapt to keep retirement savings on course is key to navigating these challenges.”
Gen X and the Financial Vortex
While the current economic conditions certainly impact everyone, Goldman Sachs’ study indicates that Gen X — the cohort most famous for grunge music and slackerdom — are the ones most impacted by the financial vortex. While younger generations like millennials and Gen Z expect to be able to retire in their early 60s, Gen X doesn’t see that happening until at least 65.
A big portion — around 65% — of Gen X are stressed about managing their retirement savings, and 50% think they are behind in their savings plan.
There are a number of reasons Gen X are especially hit by this vortex. They are frequently called the “sandwich generation,” caught between the more traditional Baby Boomers and the younger, more future-oriented Millennials and Gen Z. Many Gen Xers are both parents caring for their own children and have to deal with aging parents.
The Bottom Line
A lot is going on in the world right now, and three factors — interest rates, inflation and market volatility — have come together to create a “financial vortex.” While everyone is impacted by this, Goldman Sachs finds that it is hitting Gen X especially hard.
Tips for Dealing with the Financial Vortex
- One way to help get through the current difficult financial times is to work with a professional. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- The best advice right now might be not to panic. Don’t stop contributing to your 401(k) and don’t pull your money from the market. Remember to think about the long-term.
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