Gen Xers and Retirement

Members of Gen X will start turning 60 this year, in 2025. A wide range of people make up Generation X, which is typically described as the group born in between 1965 and 1980. They have different levels of income. But they all tend to run into the same few problems when it comes to retirement income. Here are some things to keep in mind if you’re a part of Generation X, are about to retire, and want to avoid making the same mistakes typical of Gen Xers.

Budgeting Is Crucial

A budget is even more important when you’re retired than when you’re working, but a lot of older Gen Xers have trouble with it.* Gen Xers who are getting ready to retire need to be ready to make tough choices. For the past 40 years or longer, they’ve been getting paychecks from work, but now their savings and retirement accounts will be some of the only sources of income for them. You might not have thought about whether or not you will have enough money to retire. If many Gen Xers were to actually look at how much they spend, they would see that their retirement income strategy can’t support their current standard of living.

Retirement Account Funds Can Be Withdrawn at Age 59 1/2

Since pensions are getting scarcer and scarcer, Generation X is likely to mostly depend on workplace retirement accounts like 401(k)s to fund their retirement. You can take money out of one of these accounts without penalty once you reach age 59 1/2. However, it can be hard to figure out when to start withdrawals and how much to take out. After all, if you take out too much too soon, you might run out of money. One way to find the best way to make a transfer is to talk to an experienced financial advisor.

Taxes May Go Up in Retirement

The traditional understanding is that people who are retired usually have less income and, therefore, pay less in taxes, because they are no longer working. But this is only true depending on what kind of retirement plan you have. Tax-deferred traditional 401(k) and IRA accounts are where a lot of Gen X workers have put their money away. You can get a tax break for putting money into these accounts, but when you take money out, you have to pay income tax on them.

An alternative? Consider using life insurance as a tax-free retirement income source. Yes, you can do that. Get in touch with us to find out more.

Should You Start Social Security at Age 62, or Wait?

Generation X widows and widowers who are not married may be able to get Social Security survivor payments at age 60. Most people in this group, though, can’t start receiving a monthly Social Security payment until they turn 62.

A lot of people choose to start receiving benefits at age 62, but there are some problems with this. If you start Social Security early, your monthly payout could be cut by up to a third, permanently.

People who were born after 1960 full retire at age 67. In other words, you will get all of your Social Security retirement payments at that age, with no cuts. But it gets better. For every year after that, you get an extra 8%, up until you turn 70. So, if you can, waiting until you turn 70 years old to start getting Social Security payments might be a good idea. The best time to start payments depends on your specific situation, though.

Medicare Won’t Cover All Healthcare Costs

Gen X may have to wait until age 67 to reach full retirement age, but they can start Medicare at age 65. This government healthcare program covers a lot of things, but it also has some limits. People who get Medicare usually have to pay a deductible, copay, and coinsurance requirements. Also, some services are not included in this plan. Medicare doesn’t cover long-term care costs, like those that fund nursing homes, assisted living, or memory care facilities. To cover these things, people need different coverage, like long-term care insurance or life insurance with a long-term care rider.

Investment Strategies

Members of Generation X might not be as wary of the stock market as other generations. The stock market is where much of their generation’s wealth was made. So, they might choose to leave their savings there for retirement. If you do it right, investing in the market for retirement isn’t a bad idea. But keep in mind that it’s very, very advisable to hold at least some of your money in “safe money” options, just in case of a market crash, and to do your research in order to invest smartly–we may be able to help you with this!

Estate Plans Are a Priority Now

A lot of Gen Xers don’t change their wills and estate plans as they get older. As Generation X gets ready to start retiring, it’s time to think about whether your early estate planning choices still reflect what you want. Besides that, you might have new heirs, like a new spouse, kids, or grandkids to add to your will. Along with updating your will, make sure that all of your accounts have up-to-date beneficiary and transfer-on-death information. That way, when the time comes, your money and other possessions will be sent directly to the people you chose.

 

*Source: U.S. News 

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