Hey, Gen Xers! Flick your Bic if you’re worried about not saving enough for retirement

Pull your checkerboard Vans out of the closet and flashback to the 1980s. Ahh, the 80s! You bombed around in your mom’s Ford LTD. You watched Ferris Bueller’s Day Off, over and over until the family VCR broke.  Your music came from a boom box and MTV. You rocked out with Whitesnake and R.E.M. and danced to The Pet Shop Boys. You didn’t need apps to entertain you. You were rad. But then the 90s had to go and spoil it – you had to start taking on some real responsibilities.

Generation X has had a lot to deal with since then. Many of you bought homes just before the real estate crash and may still be underwater. Some took that leap of faith and started their own business.  And, while you have the dubious distinction of being the most highly educated generation – congratulations to you! – a lot of you are still paying off your student loans or starting to save for your kid’s college tuition. 

In a recent survey, 83% of Gen Xers said they were concerned that social security won’t be there when they are ready to retire.[i]  Your generation will start turning 67, (the full retirement age for social security benefits), one year before the Social Security Trust is projected to run out of money in its current state. You may want to start factoring that in.  

Despite these hurdles, saving for your retirement should still be high priority. Here are four totally tubular tips to keep you on track to retire comfortably; after all, you want to be able to snag those front row seats when the B-52s go on their final-final world tour in 2030.

1. Maximize retirement contributions

  • Participants can contribute up to $18,000 each year in a 401(k) if under age 50. Aim for meeting this maximum every year.
  • At age 50 employees become eligible for catch-up contributions which is an additional $6,000 you add to your 401(k) account in 2017. 49% of Gen Xers are unaware catch-up contributions exist[ii].
  • Be sure you take advantage of any matching funds your employer may offer. If your employer provides a 50% match for all contributions up to 6%, make sure you are contributing at least the 6% level. Don’t leave money on the table!

2. Avoid withdrawing funds for non-retirement reasons. 27% of Gen Xers have taken a withdrawal or loan from their 401(k).[ii] These funds will no longer be working for you as you build your dream retirement. This scenario can be avoided with a properly funded emergency fund (read Millennials blog!) to cover tough times.

3.  Pay down high interest debt. Gen Xers are typically making more money now than in their younger years. It can be tempting to use credit cards to pay for the finer things in life. Live within your means. Avoid paying double digit interest rates by paying off your credit card balances each month. Some Gen Xers may also have financed their children’s college, so pay these loans off as soon as possible. Once paid off, these funds are free to put toward other things like saving for retirement!

4.  Adjust your investment strategy. As you move closer toward retirement your investment strategy should gradually shift from aggressive growth of assets to protecting your retirement nest egg. Gen Xers are prime candidates to start reducing risk while not completely sacrificing growth.  

There are 401(k) plans out there like PAi’s CoPilot that make it easier for you to understand and work toward your retirement goals. With CoPilot, you’ll be matched with investments that fit your needs. Your investments will be monitored for performance and you'll receive real-time messaging whenever an event occurs that will impact the health of your retirement. And you'll always have a clear picture of how much retirement you're actually buying, because CoPilot translates your savings into what matters most - how many years you can afford to be retired.

References:

[i] www.marketwatch.com. (2015) Seven Retirement Mistakes Gen X is making. Retrieved from: http://www.marketwatch.com/story/7-retirement-mistakes-gen-xers-are-making-2015-04-07

[ii] www.forbes.com. Seven Retirement Mistakes Gen X is making. https://www.forbes.com/sites/nextavenue/2014/08/28/7-retirement-mistakes-gen-x-is-making/2/#3386dba8669f

Ryne Lambert, MBA - Financial Services Representative Team Lead - rklambert@pai.com - 800-236-7400 x3491

Ryne is a subject matter expert on 401(k), retirement savings, investments, participant advice, personal finance education and behavioral finance.