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Tips to Help Generation X Plan for Retirement – Part 2

Generation X, those born between 1965 and 1980 need to get serious about planning for retirement.  As the oldest in this generation approaches 60, retirement is coming into view and is no longer an abstract concept.  Many Gen Xers are pessimistic about their financial future and feel they are falling behind in preparing for retirement.  

Fortunately, Gen Xers are in their prime earning years, and there is still time to catch-up on savings and plan for the future.   Below are some tips to help plan for a financially secure retirement.

Understand Your Current Situation and Set Goals: Conduct a detailed analysis of income and expenses to understand your current situation.  Set some financial goals and create a spending and savings plan to achieve those goals.

Live Below Your Means: The secret to achieving financial security is spending less than you earn.  Minimize expenses, buy a smaller house, buy good used vehicles, and avoid impulse buying.   Manage your spending to meet your goals and focus on what is truly important.  Be intentional in your spending.

Minimize Debt: Pay off high interest debt and avoid incurring new credit card debt that cannot be paid-off in the next billing cycle.  Seek opportunities to refinance debt for a lower rate and develop a plan to systematically eliminate all non-mortgage, consumer debt.

Maximize Tax Advantaged Retirement Plans:  Establish systematic savings plans to contribute to tax deferred employer plans such as a 401(k) or 403(b).  At a minimum, contribute enough to qualify for your employer’s match, if available.   Once you have met the requirement for your employer’s match, consider contributing to a Roth IRA.

Contribute to a SEP IRA or Simple plan if you are self-employed.  If you have high deductible health insurance, contribute to a tax-free Health Savings Account (HSA).  Once you reach age 50, increase contributions to your retirement plans to take advantage of catch-up provisions.

Effectively Manage Your Investments: Invest your retirement savings in a low cost, diversified portfolio that meets your investment timeframe, goals, and risk tolerance.  Rebalance your portfolio on an annual basis to stay on track.  Resist the temptation to emotionally react to short term fluctuations in the stock market.  Avoid market timing, get rich schemes, and anything you do not fully understand.  

Actively Manage Your Career: Continue learning to stay current in your field and acquire new skills.  Create a career plan with your boss to earn more and progress in your career.  Change companies or careers if you reach a dead end or you lose the passion for what you are doing.

Set Family Boundaries:  Many Gen Xers are experiencing demands on their time and financial resources from adult children and aging parents.  While you understandably want to help, you may need to set some boundaries.  Strongly encourage adult children to take more financial responsibility for their situation and ask other family members to help with aging parents.