Yahoo Finance 8 Things Gen X Can Do Now If They Want To Retire in 10 Years
Sandwiched between baby boomers and millennials, Gen Xers are those born between the years of 1965 and 1980 – making them between 44 and 59 years old today. Given that the oldests are pushing 60, retirement – isn’t too far away. If Gen Xers want to retire in a decade (between the ages of 54 and 69), they need to be extra aggressive in planning for it now.
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What should Gen X be doing to situate themselves for a secure and comfortable retirement that can happen in 10 years? Let’s hear what financial experts recommend.
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Maximize Retirement Contributions
Here’s the deal, if you want to retire in a decade, you need to kick your retirement savings into high gear. Now.
“If Gen Xers want to retire in 10 years, they’ll want to accelerate their savings in both retirement (IRAs, 401(k) plans and non-retirement (taxable) accounts,” said Justin Haywood, CFP, president and co-founder of Haywood Wealth Management. “This not only boosts savings but also offers tax diversification, which is essential for tax-efficient withdrawals in retirement.”
For retirement accounts, Haywood said to contribute at least up to your company’s match in your workplace retirement plan.
“After that, you can either invest more into your workplace plan, a traditional IRA, Roth IRA and/or a taxable account.”
You should also invest in taxable brokerage accounts as they “can provide flexibility that retirement accounts don’t offer,” Haywood said. “These accounts don’t have withdrawal penalties and can be used for expenses before reaching retirement age.
“An additional benefit of contributing to a taxable account is tax diversification,” Haywood said. “Having a mix of tax-deferred (traditional 401(k) plans and IRAs), tax-free (Roth accounts), and taxable accounts allows you to manage your tax liability more effectively in retirement. You can choose which accounts to withdraw from based on your tax situation each year.”
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Create a Detailed Retirement Budget
You will likely be living on a fixed, or at least semi-fixed income in retirement, so be sure to create a new budget to align with your new way of earning.
“Develop a comprehensive retirement budget that includes all expected expenses, such as housing, healthcare, travel and daily living costs,” Haywood said. “This budget will help you determine how much you need to save to maintain your desired lifestyle in retirement. Regularly review and adjust your budget as needed to stay on track with your savings goals. If you have trouble doing this on your own, as many people do, a fiduciary retirement planner can help simplify this process and put you on the right track.”
Diversify Investments
“If you want to retire in 10 years, you’ll want to be sure your investment portfolio is well-diversified to manage risk and optimize returns,” Haywood said. “Consider a mix of stocks, bonds and other assets that align with your risk tolerance and retirement timeline.”
Live Just Slightly Below Your Means – And Invest What You Save
Depending on your financial security and how much you have saved for and invested in retirement, you may not need to live drastically below your means, but it’s recommended that even if dramatic cutbacks are not necessary, you should reduce spending if you want to retire in 10 years.
Use what you save to contribute to your retirement fund.
“After maxing your 401(k), try to save and invest even 5% of your income and invest in low-cost broad market indices,” said Paul Tyler, CMO at Nassau Financial Group. “You will be shocked at the power of compounding. This simple good habit can lead quickly to future financial freedom.”
Get and Stay Out of Debt
According to recent research by LendingTree, Gen Xers have the most non-mortgage-related debt of all four living generations, owing a median of $33,859. It’s certainly not easy to get out of debt, especially not on a relatively short timeline, but you can make significant strides to cut down your debt. And you can absolutely avoid taking on new debt.
“Get out and stay out of debt,” Tyler said. “Especially these days; old student loans, nagging outstanding credit card balances and extended payment plans are huge, invisible balls and chains. Unshackle yourself as quickly as possible so you can create a positive future for your financial health.”
Candidates for reduction include online subscriptions, internet and cellphone plans, impulse purchases, travel costs, dining out, etc. Keep those items that allow you to enjoy your lifestyle, but you may be surprised how much you can save if you take a look.
Complete Major Home Repairs While You’re Still Employed
Here’s a really useful tip you might not have thought of: Take care of big home repairs now so that they don’t weigh on your finances when you retire in 2034. This is especially important if you do not plan on moving once retired.
“If you’re planning to stay in your current home when you retire, consider completing major home repairs or upgrades while you still have employment income,” said David Edmisten, CFP, founder at Next Phase Financial Planning, LLC.
“Using your current salary to fund expensive items like new roofs, kitchen or bathroom remodels, window replacements, landscaping, etc. can help ensure your home is in good shape and alleviate having to increase your retirement spending on these items,” Edmisten said.
Look For More Tax Savings
Edmisten noted that one of the best ways to increase your take-home wealth is to look for ways to save on taxes.
“Review your taxable brokerage accounts for opportunities for tax loss harvesting,” Edmisten said. “You can consider selling securities that may be in a capital loss, and lock in those losses to offset other realized gains or hold the accumulated losses to offset future gains. You can also consider selling appreciated securities up to the level or realized losses, to rebalance your portfolio in a tax-neutral way.”
You should also review your charitable giving.
“If you normally give to charities that you value, you can look at optimizing the way you give,” Edmisten said. “You may want to consider donating appreciated securities rather than cash, as this allows you to remove the unrealized capital gains from your future tax liability. You could also consider using a Donor Advised Fund to allow you to bunch multiple years’ worth of donations into a single tax year. Simply being strategic with your giving can help you reap tax benefits as well.”
Don’t Wait To Make These Moves
Dana Anspach, CFP, RMA and founder and CEO of Sensible Money, LLC, said that as a retirement planning expert, she can vouch for the fact that most people wait until a few years, or sometimes only a few months, from their desired retirement date to get serious about their planning. Don’t fall in that camp.
“If I could, I would waive a magic wand and make everyone get serious when they are ten years out,” Anspach said. “When you have a decade ahead of you, there are numerous tweaks you can make to improve your future outcomes.”
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This article originally appeared on GOBankingRates.com: 8 Things Gen X Can Do Now If They Want To Retire in 10 Years
