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Retirement Savings Tips For Gen Xers

retirement saving tips generation x
4 Minute Read

Retirement saving tips are important for every generation, whether you are retired, nearing retirement or just getting started. While the media places a lot of attention on Baby Boomers and Millennials saving for retirement, there’s that “forgotten” generation that needs to be addressed: Generation X.

Gen Xers are quickly on their way toward retirement age, yet many are not on track for a comfortable retirement life. According to the Transamerica Center for Retirement Studies, the median age that Gen Xers began to save was 30. This is quite a few years older than Millennials, who began at 24. Additionally, although they are older, they spend more on unnecessary expenses, such as dining out and shopping, when compared with Millennials.

Financial Hardships Among Generation X

It is true, this is a generation that has experienced plenty financial challenges. Pensions began to dwindle when they hit the workforce, and at the time, few employers were offering 401(k) plans. As their finances began to normalize, then came the Great Recession. Gen Xers took the hardest hit, as many had their money tied up in their homes. The financial crisis was like a domino effect, as it later created unemployment, causing some individuals to dip into their retirement, while others started racking up huge credit card debt.

Despite the challenges they have faced, and their current financial struggles, as a Gen Xer, you can still enjoy a comfortable retirement. However, now is the time to get serious about retirement. You have the next 15 or so years on your side, so take advantage of them.

These retirement saving tips can help you get started, or continue where you left off.

Retirement Saving Tips

Create a Retirement Goal

Motivational speaker and author Zig Ziglar once said, “A goal properly set is halfway reached.” So let’s set goals for your retirement.

Step 1 – Visualize Retirement Goals

This is the fun part in our retirement saving tips: visualizing your future. It’s also our first step in creating your retirement goal.

What do you want to do during retirement? Do you want to vacation twice a year? Buy an RV and travel the country? Write down all of your goals and make sure they’re specific. If you have a spouse, write separate goals and make comparisons.

Step 2 – Determine Cost of Retirement Goals 

After you have visualized your ideal retirement, how much will it cost? How much will the investments within your retirement account need to generate in order to support your Golden Years? During this step, don’t worry if your retirement goals seem unrealistic – just start calculating. How much do you currently have in your 401(k) or IRA? How much will your investments need to generate to reach your goals?

Step 3 – Contingency Plan

Now it’s time to create the ultimate contingency plan in the event that your investments do not support your retirement goals. Let us not forget the threat of inflation and the likely event of unexpected costs.

Be creative. Think about the unexpected expenses of the past, and if still applicable, apply them to your future. Now that you have your retirement goals in place, prioritize them and then match them to your assets. In the event that you do not reach your goals, you need to prepare ahead of time. Life expectancy is increasing and today the average person will likely live past their 80s. If you want to retire at 66 and live comfortably, you must devise a meticulous contingency plan.

Make Larger Contributions to Your Retirement Plan

According to a Transamerica for Retirement Studies, Gen X only contributes 8% to their retirement plan, while Millennials and Baby Boomers contribute 10% on average. It’s important to make higher contributions if you wish to live comfortably during retirement. Each year, you should meet the maximum contribution for your retirement plan. Remember, if you choose to skip a year, you cannot make it up the following year.

If you are eligible for your company’s 401(k) plan but you have not been enrolled, speak to the head of HR. Next, match your employer’s contributions. If you don’t, you’re essentially saying “No thanks” to additional earnings.

Even if you have a 401(k), you can take advantage of an IRA, like the Self-Directed IRA. The IRS allows you to save up to $6,000 a year in 2019 for an individual retirement account. If you are over 50, you have an additional $1,000 catch-up contribution.

Fund a Roth IRA

A Roth IRA is an IRA that is not tax-deductible, and your contributions and investment returns will grow tax-free. In other words, when you take a qualified distribution, you do not pay tax on your income or gains. Whereas with a Traditional IRA, your investment returns grow tax-deferred, but you will be taxed when you take a qualified distribution.

Roth IRAs are generally a great solution for Millennial savers and younger generations that are likely to have higher tax rates in the future. With the Roth IRA, they can pay taxes now while they are in a lower income tax bracket. As a result, they are able to “take more home” at the time of retirement. However, the Roth IRA can benefit older generations, too, as it provides tax-free income for retirement.

Contributions for a Roth IRA are the same as a Traditional IRA in 2019. If you are under 50, you can make a maximum contribution of $6,000. If you’re over 50, you have the additional $1,000 catch-up contribution to place you at $7,000.

Self-Directed Roth IRA 

With a Self-Directed Roth IRA, you receive the full benefits of a regular Roth IRA, but you have more investment opportunities when you self-direct. A self-directed retirement plan allows you to invest in traditional assets (stocks, mutual funds, ETFs, etc.) and alternative investments, such as real estate, precious metals and cryptocurrency. This creates retirement portfolio diversity and prevents your investments from moving in the same direction.

Work with a Good Custodian

If you choose to establish a self-directed retirement plan along with your 401(k), it’s important to work with a good IRA custodian. A good IRA custodian has your back and will educate you on IRS prohibited transaction rules, disqualified persons, investments you cannot make and much more. at IRA Financial, we value the importance of educating our clients on how to self-direct their retirement plans to avoid triggering a prohibited transaction and being hit with a hefty penalty or the disqualification of your plan.

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