Retirement planning strategies change throughout our careers. While not on the cusp of retirement, as many Baby Boomers are, members of Generation-X are farther along in their career journeys than Millennials and younger generations. With less time to build their nest eggs, Gen-Xers need to pursue different strategies than workers just starting out or those close to exiting the workforce.
It’s not time to panic yet, though. To help Gen X-ers get a better feel for their retirement funding, 10 experts from Forbes Finance Council share investment and saving strategies so members of this generation can maximize their retirement income potential before the time comes to hang up their professional hats.
Members of Forbes Finance Council share tips to help Gen-Xers maximize their retirement income potential.
Photos courtesy of the individual members.
1. Attack The Three Top ‘Wealth Robbers’
First, lower your taxes. When you “give” 20% to 40% of your income to the IRS, your wealth building is significantly limited. Tax planning is vital. Secondly, reduce your interest rates by restructuring debt. Every interest point paid is wealth lost. Then reexamine insurance expenses. Many people pay too much for insurance. Whatever savings you generate, pour into your retirement savings. – Justin Goodbread, Heritage Investors
2. Maximize Your Pre-Tax Contributions
There are many vehicles that will allow you to maximize your pre-tax deductions for savings. State and federal taxes are in constant review and flux. The only way to combat this is to use every tool available to maximize your contributions to lower your taxable income. A CPA and financial planner should customize a plan based on your needs. Also, 401(k), individual retirement accounts (IRAs), 529 plans and health savings accounts (HSAs) could help. – Anthony Holder, C&H Financial Services, Inc.
3. Diversify Your Portfolio Through Self-Direction
Being on the cusp of retirement age can be scary, especially if you don’t have a lot saved. One retirement saving strategy Gen X-ers can employ is portfolio diversification through self-directed retirement accounts. These accounts allow you to invest in alternative assets, which is a great way to gain better control over your investment returns and hedge against stock market volatility. – Jaime Raskulinecz, Next Generation Trust Company
4. Never Invest In What You Don’t Know
Investing for retirement is easily one of the most important decisions in your life. Never invest in something you don’t understand, no matter what the glitz and glamour look like. Be prudent in your decisions and always think long term. If you have an investment you are excited about and have researched it, move forward. Never put your eggs in one basket—make sure your portfolio is diversified. – Tyler Gallagher, Regal Assets
5. Consider Tax-Free Investing Options
Too often, Gen X-ers nearing retirement have too much of their wealth in tax-deferred accounts, such as 401(k) plans. They should consider tax-free asset classes—such as Roth IRAs, Roth 401(k) plans and permanent insurance—as vehicles to tax-free growth and savings. If still working, they should look to contribute to Roth 401(k) plans if available through their employer. – Christopher Berry, The Castle Wealth Group | Estate, Tax & Retirement Planning
6. Open An HSA Plan
HSA plans are a great way to save for healthcare costs in retirement because of the triple-tax advantage: pre-tax contributions, tax-free interest and tax-free withdrawals for qualified medical expenses. Gen X-ers still have time to save significant money in an HSA if they have a qualifying high-deductible health plan (HDHP). These funds can be used for future dental, vision, hearing and long-term-care expenses. – Danielle Kunkle Roberts, Boomer Benefits
7. Prepare For Healthcare Costs
As the Gen X-ers approach retirement age, they should be saving for future healthcare costs, like Medicare. As they get closer to retirement and aging into Medicare, it’s wise to stay on top of what the current premiums and deductibles are to help them prepare for how much they need to have to cover these out-of-pocket medical expenses. Contrary to what many people believe, Medicare is not free. – David Haass, Elite Insurance Partners, LLC
8. Start Maxing Out Your Retirement Accounts
Put as much away for retirement as possible. Max out your 401(k) contributions (currently at $19,000 + $6,000 catch-up if over 50 years old), even though your company match may be much lower than that. You should also put in the maximum IRA contributions each year (currently $6,000 + $1,000 catch-up if over 50 years old). These investment accounts will grow tax-deferred. – Kirk Badii, Badii Group Private Wealth Management
9. Eliminate Debt And Establish Passive Income
The best retirement planning tip for Gen X-ers would be to eliminate debt—specifically credit card debt and auto and school loans. Once you eliminate these types of debt you can commit additional funds to your retirement accounts. In addition, aim to establish a form of passive income from either an investment property or a high-yield dividend instrument that provides you reliable recurrent income. – Geanette Rodriguez-Ojeda
10. Hire A Financial Planner
It starts with a financial plan, not investing. Clearly stating the amount you need to save monthly—given your appropriate level of risk—to achieve your desired amount by the desired date is vital. Your rate of return is essentially rendered void—past, present, or future—if you don’t have a planned date and amount. I would also consider hiring a financial planner to hold you accountable. – David Miller, PeachCap Inc.