Generation X, As the first of the generation marks their 60th birthday in 2025, this brings a retirement planning challenge along with an opportunity for them. Born between 1965 and 1980, Gen Xers are characterized by many to be independent, resourceful, and techno-savvy. Still, retirement planning is something beyond grit; rather, it’s strategic financial planning coupled with adaptability. This is what Gen Xers need to know to secure enjoyment in their retirement.
1. Budgeting Is No Longer Optional
Retirement is a definitive shift away from paychecks to managing a budgeted, static income. Many financial professionals recommend a plan that works before retirement commences.
“Most Gen X clients underestimate how much they spend,” says associate partner at Hightower Wealth Advisors, Zach Ungerott. The change of life occurs when persons gain insight into where their thousands of dollars are going monthly-cost of housing, healthcare, and leisure activities.
Many retirees find that they cannot sustain their lifestyle at the current rate. With living costs and interest rates on the rise, for many, downsizing or moving may not be an option. Adjusting your spending habits now will make any transition easier down the road.
2. Timing Your Retirement Funds
Self-funded retirement savings, which include 401(k) accounts and IRAs, have made up most of Generation X’s retirement savings. Withdrawals can be made without penalty after age 59½. However, the strategy of withdrawing funds will be very crucial.
“Too much too soon can drain your funds too soon,” says Daniel Razvi, senior partner at Higher Ground Legal. “Getting a financial advisor to work together with retirees on balancing withdrawals helps them stretch the savings for longer periods.”.
3. Be Prepared for Increasing Taxes
Not everyone thinks of retirees as automatically being in a lower tax bracket. Many Gen Xers have been saving in tax-deferred accounts, such as traditional 401(k)s and IRAs, in which withdrawals are taxed as ordinary income.
To minimize the tax burden, financial planners suggest converting to Roth accounts, which allow tax-free withdrawals in retirement. Converting funds from traditional accounts to Roth accounts while working may also lock in today’s tax rates.
4. Social Security Strategies
Social Security benefits may be taken at age 62, but there is a trade-off. Taking Social Security early will reduce monthly payments by as much as 30% while waiting until age 70 will provide an 8% annual increase.
Survivor benefits are an option for those who are unmarried widows or widowers and can take Social Security as early as age 60. It is important to know these options to get the most lifetime Social Security income.
5. Medicare and Health Care Expenses
Medicare starts at age 65, but it does not pay for all health care. Long-term care, dental, and vision services are usually not covered and require additional insurance. To plan for these expenses, consider contributing to a Health Savings Account (HSA). HSAs allow tax-free savings for qualified medical expenses, providing flexibility for unexpected health needs.
6. Rebalance Investment Strategies
Members of Gen X, who have generally built their savings through the stock market, are likely to diversify those funds as they age toward retirement. Certain investments, such as Treasuries or certificates of deposit can be rolled into stable investment portfolios and save savings from the rollercoaster of the market.
Annuity fees are another important aspect. Simply reducing management fees from 1 percent to 0.25 percent on a $100,000 portfolio saves almost $30,000 over 20 years.
7. Don’t Forget Estate Planning
An estate plan, whether in the form of a will or trust, is essential to protect assets and make the transition to heirs as smooth as possible. Gen Xers should review and update these documents regularly to reflect changes in family or financial circumstances.
The Bigger Picture
Beyond the financial, retirement is a chance for reinvention. Many Gen Xers are looking into “golden gigs,” side hustles, or part-time work in fields they’re passionate about. A 2023 survey found that gig workers over 50 earn an additional $12,000 to $15,000 annually on average, supplementing retirement savings and providing meaningful engagement.
From tax management to newer sources of income, Generation X is all set to redefine retirement. Proactive planning and changeability will ensure that this marks the beginning of a bright and sound chapter.
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