Are Gen Xers worried about saving for retirement?
Pull your checkerboard Vans out of the closet and flash back 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. MTV still aired music, and you blasted your tunes through the speakers of a boom box. 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 of you took a leap of faith and started your 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 . Your generation will start turning 67, the full retirement age for Social Security benefits for those born after 1960, in 2032—just 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.
Tips for saving near retirement age
1. Maximize retirement contributions
One of the most obvious, yet underutilized, tactics for building a retirement nest egg is to maximize retirement contributions. If you’re still under the age of 50, you’re eligible to contribute up to $18,500 each year into a 401(k) plan. If you’re reaching retirement age but don’t feel comfortable about your current savings, aim to meet the maximum contribution limit each year. Once you turn 50, which for many Gen Xers is right around the corner, you’re eligible to contribute an additional $6,000 per year to your 401(k) in catch-up contributions, which only about half of Gen Xers are even aware of .
While you’re analyzing your current 401(k) savings behaviors, make sure to take advantage of any matching funds your employer offers. If your employer provides a 50 percent match for all contributions up to 6 percent of your salary, make sure you are contributing at least 6 percent of your salary! It doesn’t make sense to leave money on the table.
2. Avoid withdrawing funds for non-retirement reasons.
While 27 percent of Gen Xers have taken a withdrawal or loan from their 401(k), this strategy isn’t always ideal . But why not? Aren’t you basically borrowing your own money? Essentially, yes. But there are some serious implications for taking money out of a 401(k) plan. First, the money is out of the plan and not invested, so there is lost investment opportunity. Additionally, the loan is being paid back with after-tax dollars that will be taxed a second time when distributed from the plan. This scenario can be avoided with a properly backed emergency fund to cover tough times.
3. Pay down high-interest debt.
Gen Xers are typically making more money now than they were back in the day, and it can be tempting to buy the finer things in life—even if that means racking up debt on credit cards. 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 helped their children finance college, and paying these loans off as soon as possible will free up the funds 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, so consider transitioning to a more conservative 401(k) growth model as you age.
Although there’s no “one and done” solution for preparing for retirement, learning how to run your 401(k) with maximum efficiency and taking steps to prepare for your financial future will help you grow your retirement nest egg and put you on the path to retirement readiness.