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Financial Aerobics for Gen Xers: Get Your Retirement Plan in Shape This Year

While you can’t moonwalk back in time to redo lapses in retirement saving, these four tips can help you kickstart your future financial planning.

Kallee Feuz Dec 18, 2020

The generation that once rocked out to Rod Stewart’s “Forever Young” and Tom Waits’ “I Don’t Wanna Grow Up” is now facing the inevitable: getting older. And they might not be ready for it.

About 40% of Generation X workers — people born between 1965-1980 — already believe that they may need to delay retirement, according to Ameritrade’s Covid-19 and Retirement Survey.

Long after shedding their pegged jeans and hairspray, the demographic known as Gen X has settled into middle age, now mostly in their 40s and 50s, with inadequate retirement savings. Only 14% are very confident that they will be able to retire with a comfortable lifestyle, according to the Transamerica Center for Retirement Studies.

The good news is that the MTV- and Seinfeld-watching cohort may be poised for a Rocky Balboa-style comeback when it comes to retirement planning. After taking a punch in the early months of the pandemic, their 401(k)s have mostly bounced back, and the current economic climate is causing them to focus on their financial futures. Three-fourths (76% ) of Gen Xers say they will prioritize saving for retirement once the Covid-19 pandemic is over — more than any other age group.

But Gen Xers don’t have to wait until the pandemic’s end to start saving for retirement. You can begin working toward retirement goals now. The beginning of the year is the perfect time to get your retirement plan in shape with some simple financial aerobics and our four Gen X retirement planning tips.

Gen X Retirement Planning Tip #1: Estimate how much you need

Bueller? Bueller? If you were one of the sleepy (or absent) students in Ferris Bueller’s economics class, there’s an easy rule-of-thumb for calculating retirement needs: you’ll need to replace about 70 to 90 percent of your pre-retirement income. So, if you earn $70,000 a year before taxes, you might need $49,000 to $63,000 a year in retirement income to enjoy the same standard of living you had before retirement.

Of course, there’s no one-size-fits-all when it comes to or pleated trousers, or retirement planning. Generally, the lower your income, the higher the portion of it you will need to replace.

There are numerous online retirement planning calculators (more user-friendly than the TI-81 you used in Calculus) that can help you estimate how much you should be saving. Professional financial planners are a great resource as well.

Gen X Retirement Planning Tip #2: Set goals

Your future dreams were once encapsulated in the “New Kids on the Block” poster hung in your childhood bedroom. Now it’s time to envision what retirement might look like. Do you hope to relax at home, move to a retirement community or live near grandchildren? What is the outlook for your health? At what age do you plan to retire? All these things will help determine your retirement goals.

Revisit your retirement plan regularly — nearly as often as you changed the batteries in your Sony Walkman — as your vision of retirement, your earnings, and your financial circumstances may change.

Gen X Retirement Planning Tip #3: Consider your sources of retirement income

It wasn’t enough to spend your adolescence faithfully consuming Mr. Belvedere and Silver Spoons on TV. Unless you were born with a silver spoon, you’ll need to save a nest egg large enough to close the gap between any Social Security benefits you will receive and the amount of income you need. This nest egg can come from your retirement accounts at work, IRAs, annuities, and personal savings

Keep in mind that Social Security benefits only go so far in paying the bills. The average senior in 2020 collected about $1,500 per month in Social Security benefits.

Gen X Retirement Planning Tip #4: Make up for lost time

If you find yourself getting closer to retirement with inadequate savings, there are several strategies you can use to catch up:

  • Curb your spending. “We are living in a material world,” as Madonna put it, and it’s never too late to start budgeting. Sticking to a budget will help your money last longer, and it will get you in good habits for living on a fixed income.
  • Catch up on your 401(k). While you can’t moonwalk back in time to redo lapses in retirement planning, the IRS has a catch-up rule that’s almost as helpful. If you’re over age 50, the IRS allows catch-up contributions to your 401(k) account as well as other retirement vehicles. For example, in 2020, you could contribute up to $6,500 over the regular limit of $19,500, for a total of $26,000.
  • Put off collecting Social Security. Procrastination worked out well for Molly Ringwald — the ultimate Gen Xer — and her fellow misfits in “The Breakfast Club,” and here’s another instance when it pays off: The longer you wait to collect (up to age 70), the larger the payout. Also, Social Security factors in the 35 years in which you earned the most money to calculate your benefits. So if you’re making a good salary in those last years of work, it would likely be to your advantage to wait before collecting benefits because higher lifetime earnings may result in higher benefits when you retire.
  • Rebalance your portfolio. Most children of the ‘80s understand the magic of the mixed tape. When it comes to your investment portfolio, you want to have a healthy mix of stocks, bonds and cash. Financial professionals recommend that your investment accounts be reviewed periodically for increased return potential. Rebalancing can help you match your investments with your original goals or accommodate your changing needs.
  • Focus on your health. Make your health a priority in 2021 —  and not just because it’s a good New Year’s goal and you have fond memories of Jane Fonda workouts. Out-of-pocket medical expenses can eat away at your assets or income as you get older. By eating healthy, exercising and taking advantage of preventive care, you may be able to reduce medical expenses, giving you more money for retirement —  and better health to enjoy it.

Having lived through the end of the Cold War, Y2K, and the dot-com bubble, the Great Recession, and now a pandemic, Generation X has gained the resilience and wisdom to meet their greatest challenge yet: getting older. A little planning can go a long way toward making the years ahead as memorable as years past.

Kallee Feuz is a public relations officer for Zions Bank.

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