The Gen-Xer's Guide to Retirement Saving
If you are a Gen-Xer, born between 1966 and 1975, retirement probably has you nervously eyeing your retirement account. According to a study conducted by The PEW Charitable Trusts, Gen-Xers were hit hard by the recession, losing nearly half (45%) of their wealth between 2007 and 2010. That is the bad news and it means you may have to work harder to save for retirement. The good news is that you still have time to save, and we have some guidance for you.
Start immediately: Some Gen-Xers would prefer to put off saving for later in life. If you are a Gen-Xer, somewhere between the ages of 41 and 50, you may have kids at home or at college. You may also be paying down a mortgage and other large debts (your own education debt, a car or boat loan, etc.). This is the time in your life when your finances are drawn in many directions, so saving money can seem like an impossible dream.
Fortunately, you may also be at the height of your career and money-making potential as a Gen-Xer. This is the time to direct a portion of your paycheck, every month (or more often, if possible), to your retirement accounts. Time is still on your side and the earlier you begin saving, the more time you give your money to earn interest.
Take advantage of your employer match: If your employer matches your 401(k) investment, accept the gift and save the maximum amount. Otherwise, you are essentially throwing part of your paycheck away.
Make catch-up contributions:
Gen-Xers who have hit the 50-year mark in any calendar year may contribute an extra $1,000 to an IRA account each year, and an extra $6,000 to a 401(k), 403(b), or 457 plan. Make these extra payments, and you could sock away another $100,000 (more, if you save longer) before retirement.
Don’t touch your retirement funds:
Once you’ve put your money into a retirement fund, keep it there. Consider your retirement account an untouchable reserve, which you don’t reach into unless you are absolutely at the end of your rope. To help you refrain from stealing from your retirement account, you can build a non-retirement savings account, like a certificate of deposit (CD) or a money market account, which will accrue interest but is available when times are tight (some penalties may apply if you withdraw a CD prior to the maturity date).
Set a goal and develop a plan for achieving it:
If you don’t know how much you need for retirement, you are less likely to save an adequate amount. Talk to your financial advisor about how much you will need to retire comfortably and then determine how much you will need to save annually and monthly in order to reach that goal amount. Your financial goals will keep you motivated to maintain a savings schedule. Check in with your goal periodically to make sure you’re on track. If you find yourself falling behind, kick up the motivation level by considering more creative ways to save (see below).
Note: Use our retirement calculators to determine how much you need to save for retirement.
Get creative with your savings:
I encourage you to think creatively about your savings. Aside from forming new neural pathways in your brain, it can help you find money in places you would otherwise have never looked.
Your work paycheck isn’t the only tool in your toolbox for funding retirement. Your resources are only as limited as your imagination. Here are just a few ways to generate money for your retirement account:
- Clean out your basement, attic, and garage and set aside those forgotten treasures—sports equipment, furniture, old children’s toys—that you no longer use. Your old stuff may be worth a lot to other people. Sell them on eBay or Craig’s list, on your local listserve, or through the classified for some extra retirement money.
- Pick up a part-time or weekend job that you enjoy and dedicate all of the proceeds from that job to your retirement.
- Do you get small refunds, random returns on a stock your grandmother bought you, occasional birthday checks from Aunt Maisie? Any small revenue stream that you would normally cash and use for fun, you can decide to put toward your retirement rather than toward the next gadget.
- Do you have a bad habit that you want to quit, like drinking, dining out regularly or smoking? Why not put the money you save, by living a healthier life, into your retirement account?
- You can also save money by paying down unsecured or high-interest debt more quickly. In doing so, you will pay less overall in interest and the money you save can fund your retirement instead.
Meet with your financial advisor:
Meeting regularly with your financial advisor is important. Not only will they be able to offer you regular money-saving tips but you will be able to keep them up to date on important events in your life that will affect your portfolio. Financial advisors can offer inspiration and spur you to save more and make more out of you money, so keep them close at hand and take advantage of the wealth of knowledge they can offer you.
Enjoy your happy ending
As a Gen-Xer, you are in a good place to save money. You may be spending more, but you’re also earning more than ever before. This is the time to save what you can so that when you hit your mid-sixties, you can head into retirement comfortably.
Concerned about retirement? Contact MEMBERS Financial Services and begin planning.
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