Sandwiched between the more populous boomer generation and even more populous Millennials, Gen Xers often find themselves overlooked when it comes to financial planning resources.
However, retirement is on the horizon for the oldest members of that group, born in 1965. Many are over age 59 1/2 and can withdraw from retirement accounts without a penalty.
Mike Rogers is part of Generation X. After the 2008 global financial meltdown, he and his wife, Christy, decided to focus on their retirement savings and overall financial situation.
“We got serious about eliminating consumer debt and leveraged raises and bonuses to eliminate debt and ramp up retirement savings,” said Rogers, a 52-year-old construction manager in Kingsport, Tennessee, in an email.
“We kept our lifestyle below our means and aggressively saved higher incomes and any windfalls,” he said.
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Gen X Facing More Challenges Than Boomers
In many ways, Gen X has had a tougher slog than the boomers, particularly boomers born before 1960.
“Gen X is saddled with heavier student loans than their parents. This debt has severely restricted cash flow and delayed life decisions like buying a home and having children,” said Kevin Estes, founder and financial planner at Scaled Finance in Bellevue, Washington, in an email.
Because they often started families later than the boomers, many Gen Xers now find themselves with children still at home while also caring for their parents and trying to save for retirement.
There are still more challenges, Estes noted.
“Housing prices have grown faster than income for decades. Homes are generally less affordable for Gen X than they were for baby boomers,” he said.
Seeing the Bigger Picture
Despite Gen X’s challenges when saving for retirement, it’s far from being a lost cause.
“When I work with Gen X clients, I often show them various scenarios for how much they might be able to spend in retirement given different savings rates, including their current savings rate,” said David Seery, a certified financial planner at Forum Financial Management in Thousand Oaks, California, in an email.
Seeing an illustration, he added, allows Gen X clients to conceptualize what their savings level would deliver for them in retirement.
“This can serve as a wake-up call for many if they need to ramp up their retirement investing and revisit their budget,” Seery said.
For some investors, financial education may come from discussions with friends or family, websites or limited guidance from a certified public accountant.
“While they might hear bits and pieces of financial guidance from various sources, it is not often put together in a comprehensive manner that allows them to understand how the pieces fit together and what it all means for their particular situation,” he said. “With a few changes, it is possible to get on track to make retirement dreams a reality.”
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Learning About Finances
Learning about finances and investing has been a key component of retirement readiness for Stephanie Montague, a Gen Xer who runs the military travel site Poppin’ Smoke. She and her husband, who is retired from the U.S. military, live in Spain, which helps control expenses.
Although Montague has long been a disciplined saver and lived below her means, she, too, had to educate herself about money.
“As critically important as it is, investing and retirement planning seem too complicated, so many people just ignore it,” Montague said in an email. “Even after getting my MBA, I still felt overwhelmed when deciding how to allocate my retirement plan contributions at a new employer.”
Montague credits retirement planning books such as “The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life” with helping to demystify the process and recommends that other Gen Xers read up on the subject.
[READ: The Best Retirement Planning Books for 2024]
Investing More Than Boomers
One of the biggest challenges facing Gen X, relative to the boomers, is the lack of pensions. Corporate pensions are essentially dead, and public-sector pensions are less generous than in the past.
“This was really the first generation of the 401(k) plan, and I think most of them relied too heavily on these and are now realizing it may not be enough,” said Dan Bennett, a certified financial planner and founder of Lake Water Advisory in Skaneateles, New York, in an email.
“Their parents may have gotten away with saving 5% to 10% of their income. Now, a savings rate closer to 15% to 20% and sometimes more is preferred, depending on living expenses and spending habits,” Bennett added.
Bennett’s firm has been working with clients in their 50s who hope to retire in 10 to 15 years. With their children grown, these clients have more disposable income to max out Roth individual retirement accounts and fund brokerage accounts. Bennett said that beefing up retirement savings to more than 20% of income during their highest earning years increases their probability of a successful retirement.
Taking a Proactive Approach
Gen Xers can pad their retirement accounts by taking advantage of savings opportunities during those high-income years. Fortunately, most still have time for that.
“An amazing amount of catch-up savings can be accomplished during your peak earning years if you are committed to saving,” said Adrienne Ross, a certified financial planner at Clear Insight Wealth Management in Spokane, Washington, in an email.
Ross had a Gen X client who came to her later in life, divorced with two grown children living independently.
“When she was in her early 40s, she had worked hard and earned new certifications that allowed her to get a series of consecutively higher-paying jobs. Once her kids were grown, she kept her lifestyle at the same level as when her income was lower and focused on building her retirement savings,” Ross said.
Because she started saving for retirement later in life, this client aimed to max out her retirement contributions each year, also taking advantage of a generous 6% employer match on a 401(k).
“It was challenging, but it was also worth it. Those first few years of hyperfocus on retirement savings as she was getting started allowed her to seed her accounts with contributions that would have the longest time horizon for growth,” Ross said.
Embracing Real Financial Planning
Gen X has some advantages over the boomers, such as the ability to fund Roth IRAs and 401(k)s with after-tax dollars, helping to minimize retirement taxes. That’s also a way of protecting capital from future tax increases.
By taking steps now to build up resources, Gen Xers can still have a good retirement outcome.
“Gen-X is arriving at the age where it’s time to leave rules of thumb and vague principles behind,” Rogers said. “It’s time to plan with real data. How much you spend, save and invest.” Do-it-yourself financial planning and modeling software can help shape your retirement budget.
“And getting professional planning isn’t a bad idea either,” he added.
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Here’s How Gen Xers Are Catching Up on Retirement Savings originally appeared on usnews.com
