If you happen to have been born between 1965 and 1979 you would be appropriately placed in the Gen X generation. This makes you younger than your boomer parents but still faced with your own set of issues when it comes to retirement. For many in this generation, the thought of “retirement planning” seems very far off…but it gets here sooner than we think.
Knowing you are in this age group means there are certain things you should be doing to prepare for your retirement down the road. Certain things that will help you position yourself so you can retire at a reasonable age and have a good lifestyle in front of you during your retirement years.
According to a 2018 survey from AmeriTrade, 43% of Gen Xers say they’re behind on retirement savings and a mere 33% of people 39 to 53 years old are confident about being financially secure when they retire. Many Gen Xers are still feeling the impact of the Great Recession, says TheBalance.com in the article “Retirement Milestones to Hit for the Gen X Years” They are also feeling the double-crunch of paying off their own college loans, while trying to save for their own children’s college education.
Getting past some of these financial obstacles is possible, as is getting your retirement savings on track. However, you’ll need a plan or nothing substantial will change. Your estate planning attorney can help you in putting your plan together and connect you with other professionals as you need additional assistance along the way. Here are some critical milestones to aim for as you set out to get yourself back on track with a reasonable retirement goal.
- Set a Target. You’ll want to know what you are aiming for in retirement and that means knowing about how much money you’ll need to accumulate. Consider what kind of a reasonable lifestyle you want to have when you retire. Does retirement look like a lot of luxury travel or are you open to the idea of seeing the world from an Elder Hostel or other reasonable lodging? What kind of housing will you want to live in and what kind of car will you want to drive? Will your children be self-supporting by the time you retire or will you be needing to continue funding some of their expenses into your retirement? All these questions will be important to figuring out what kind of a nest egg you’ll need.
- Does Your Employer Offer a 401(k) Plan? This could be your greatest tool for retirement savings. You can save for retirement on a tax-deferred basis while you are entering your peak earning years. If you’re fortunate enough to work for a company that matches contributions, you should definitely take advantage of this so your retirement savings will grow even faster. If you haven’t already started using this employee benefit, start doing it today. Are you saving enough to qualify for the full employer match? You should do what you can to bring your savings level up to the point of full matching. If you are already getting the match, can you increase your own contribution? If you can’t make an adjustment now, consider making a small increase to your savings, like 1% to 2% every year. If the gradual increase grows along with your paychecks, you won’t notice the difference.
- Look into Other Tax Advantaged Accounts. As you move into your late 30s and early 40s, your earnings are most likely growing, so you need to look past your employers’ plans. Consider a traditional IRA (Individual Retirement Account) or a Roth, depending on your income level. If you qualify for a Roth IRA, the money is 100% tax-free, when you withdraw it. The traditional IRA is taxable in retirement so you will want to plan for that in the future. But even if you do use a traditional IRA account, you have the benefit of a tax deduction on your contributions.
- Don’t Overlook the Health Savings Account. The HSA is not a retirement savings account but it can be very useful in funding retirement costs. HSAs are designed to allow you to save for qualified medical expenses. Contributions to these accounts are tax-free, if they are used for health care…but you can also tap into one of these accounts for other reasons. Withdrawals from an HSA are penalty-free after age 65. However, you will have to pay regular income tax on the money. If your employer offers a matching contribution to an HSA, there’s no reason not to fully fund one of these accounts.
So even if you are a Gen Xer, you have the opportunity to start saving in a variety of ways for your retirement. Just because you’re behind or haven’t started the process doesn’t mean you can’t catch up. It might mean some sacrifice over the next several years to get you where you want to be but it can be done with some careful planning. Talk to your estate planning attorney and have them help you put together a plan that will work for you today to ensure your retirement tomorrow.