In 2025, members of Generation X will begin turning 60 years old. The generation limits of Gen-X are typically agreed to be 1965 to 1980. Did you know this generation frequently encounter the same few issues when it comes to retirement planning, though? Here are some things to keep in mind if you’re a member of Generation X who will soon be retiring.
Budgeting Is Crucial
Many older members of Generation X struggle with budgeting, despite the fact that it is much more crucial in retirement than it is in working life. Members of Generation X must be ready to make tough choices as they approach retirement. After forty years of working to earn wages, your retirement and savings accounts will now be some of your only sources of income going forward. It’s possible that you haven’t thought about whether you’ll have enough money for retirement. Many Gen Xers, unfortunately, will come to discover that their retirement income strategy is insufficient to sustain their current standard of living.
Retirement Funds Can Be Withdrawn at Age 59 1/2
Given the growing scarcity of pensions, Generation X is probably going to rely mostly on employer-issued retirement plans like 401(k)s to fund their retirement. You can take money out of one of these accounts without incurring penalties after you reach age 59 1/2. It can be challenging to decide how much to withdraw and when to begin taking payments. You run the risk of running out of retirement money if you take too much too soon. One technique to determine the optimal withdrawal strategy is to consult with an experienced financial advisor.
Taxes Can Go Up in Retirement
According to conventional belief, after leaving the working, retirees pay less in taxes since they have lower incomes. In practice, though, this might not always be the case. A large number of Gen Xer employees have funds in traditional 401(k) and IRA plans that are tax-deferred. This means that, while you may get a tax break by putting money into these accounts you will have to pay income tax on withdrawals later down the line. Depending on your strategy, you may want to consider a different option. For example, utilizing life insurance as a source of tax-free income—yes, you can do that—might be something to think about. Get in touch with us to find out more.
Social Security Can Begin at Age 62
Widows and widowers who have not remarried may be eligible to receive Social Security survivor benefits at age 60. But for the majority of people, the earliest age at which they can start receiving Social Security benefits is 62. Although it’s a popular choice to start receiving benefits at age 62, there are some disadvantages. Your monthly payout might be permanently reduced by up to one-third if you begin receiving Social Security benefits too early. The fullretirement age for anyone born in 1960 or after is 67. This means that at that age, you will receive your full Social Security retirement benefits without any reduction. It goes further, though; you get paid an extra 8% for each year you wait past that, capping at age 70. Therefore, waiting until you are 70 years old to begin receiving Social Security benefits might be the right choice for you. The best time to begin payments depends on your personal situation and needs.
Medicare Won’t Cover All Healthcare Costs
It takes Gen Xers untill age 67 to reach full retirement age. Medicare can begin at age 65, though. Although it has restrictions, this government healthcare program provides complete coverage. Generally, Medicare enrollees must pay a copay, coinsurance, and deductible. Additionally, some services are not included in the program. Most crucially, Medicare does not pay for continuous long-term care expenses, including those spent in nursing homes, assisted living, and memory care facilities. To cover those things, retirees need to have separate coverage, like a life insurance policy with a long-term care rider or a long-term care insurance policy.
Investment Strategies
It’s possible that members of Generation X are less reluctant to invest in the stock market for retirement than other generations. A large portion of their generation’s wealth was amassed in the stock market, after allt. They might, therefore, choose to leave their retirement savings there. If done properly, investing in the market for retirement is not always a bad idea. However, you have to keep in mind that if you suffer a loss, you won’t have time to simply wait until you make it back; your savings are the majority of your income in retirement, and if you lose them in the market, you may not be able to support yourself. You might have to return to work, which could be difficult or even impossible depending on how far into retirement you are.
Therefore, we believe it’s preferable to keep at least some of your money in “safe money” options like savings accounts, a life insurance policy, or a fixed indexed annuity. When you do invest money in the market, make sure to do so cautiously and do your research. We may be able to help you with this.
Estate Plans Are a Priority Now
As they get older, Gen Xers may neglect to update their estate planning documents. As generation X begins retiring, it may be a good time for you to analyze your estate planning choices and whether or not they still reflect your preferences. For example, you may have new assets, or new heirs to add to your Will. For example, a new spouse, child or grandchild. Make sure any beneficiary and transfer-on-death designations on individual accounts are up-to-date, and update your will as well. This way, your money and other possessions will be delivered to the intended individual when the time comes.
*Source: U.S. News