Are you a member of Generation X? Generally defined as individuals born between the mid-1960s and early 1980s, Generation Xers today are in their 40s and 50s. They still have time to save for retirement, but it’s quickly approaching on the horizon.
Generation X has faced a number of challenges, including the financial crash of the late 2000s and stagnant wages. Generation X is also sometimes called the “sandwich generation” because they’re between two larger generational groups—baby boomers and millennials. Of course, this also means that many Gen Xers are supporting elderly parents and young adult children.
Are you a Gen Xer who’s behind on retirement? You’re not alone. A recent study from Transamerica found that only 12 percent of Gen Xers feel secure about their ability to retire. The study found that the average Gen X household has only $69,000 in retirement savings.1
Fortunately, you have time to develop a plan and boost your savings. Your window may close quickly, though, depending on how old you are. There’s no time like the present to take action. Below are a few tips to get you started:
Estimate your needed retirement savings.
You wouldn’t start a road trip without establishing a destination. It would be impossible to develop a route or track your progress. Similarly, you shouldn’t develop a retirement plan without establishing an end goal. Otherwise, it would be difficult to know if you’re on track.
In your retirement strategy, your destination takes the form of a retirement number. That’s how much you need to save to fund your expenses and desired lifestyle in retirement. Obviously, you can’t predict every expense you may have in retirement, but you can develop an informed estimate based on your current spending and inflation.
Once you’ve estimated your spending in retirement, take some time to project your retirement income from sources such as pensions and Social Security. If those sources don’t cover all your expenses, you’ll need to take distributions from your savings to make up the difference. Multiply that difference by the expected duration of your retirement, such as 30 years, and you’ll get a ballpark retirement number estimate.
This is clearly a simple approach to estimating your savings goal. It doesn’t include things like inflation, investment returns or other important factors. However, it’s an easy way to determine your savings objective. A financial professional can help you develop a more precise retirement estimate.
Look for ways to boost your savings.
Perhaps the most effective way to boost your retirement savings is simply to spend less and save more. Of course, that may be easier said than done. One way to reduce your spending is to implement a budget, which can help you manage your spending and track your progress toward large financial goals such as retirement. Unfortunately, nearly 60 percent of Americans don’t use a budget.2
If you’re among that group, now may be the time to make a change. You can use an online budgeting program or a simple spreadsheet, or even a pencil and paper. Look for areas to cut back, like on entertainment and dining out. Perhaps you could consolidate debt and reduce your interest costs. Every dollar in spending you can cut is a dollar you can allocate toward retirement.
Take steps to minimize your risk exposure.
Even the best-laid plans can be thrown off course by an unexpected emergency. For example, you could suffer a disability on the job. Or the unexpected death of you or your spouse could create financial difficulty. The financial markets could decline sharply.
Work with a financial professional to evaluate your risk exposure and take preventive action. For instance, you could use insurance to protect against disability risk or unexpected death. Tools such as annuities can protect against market loss and even generate guaranteed retirement income. Develop a risk management strategy to protect your retirement.
Ready to develop your retirement strategy? Let’s talk about it. Contact us today at Oliver Financial Group. We can help you analyze your needs and goals and develop a plan. Let’s connect soon and start the conversation.
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