What Generation X needs to focus on to retire successfully
Lorie Konish | @LorieKonish
Published 9:05 AM ET Mon, 9 July 2018 Updated 4:58 PM ET Mon, 9 July 2018CNBC.com
- Many members of Generation X, who are now in their 40s and 50s, were hit harder by the Great Recession and are still catching up financially.
- This so-called Sandwich Generation also faces challenges in getting ahead financially while caring for their parents and children.
- It's not too late for Gen Xers to make up for lost time when it comes to their retirement savings, experts say. But many will need to undergo a reality check in order to make real progress.
If you’re a member of Generation X, chances are you may be feeling that “Reality Bites” when it comes to your retirement planning.
That is because many members of Gen X — who were born between 1965 and 1978 — face challenges that the baby boomers who came before them and the millennials after them do not.
A recent survey from the Transamerica Center for Retirement Studies found that Gen X Americans are more likely than baby boomers and millennials to indicate they "may never recover" or have "not yet begun to recover" from the Great Recession.
At the same time, they are juggling their careers and caring for their aging parents. And many of them are behind on their retirement savings.
A separate survey from money manager Personal Capital found that more than one-third of Gen Xers — 34 percent — have no retirement savings.
As the youngest Gen Xers turn 40 and with the oldest in their early 50s, there is still time to catch up. But they have to act now, according to Catherine Collinson, CEO and president of the Transamerica Institute and Transamerica Center for Retirement Studies.
“They still have a time horizon where they can build plans, save more and achieve financial security in retirement, but they’re also not getting any younger,” Collinson said. “So the sooner they get started and refocused, the better off that they can be in the long run.”
Come up with a plan
For many Gen Xers, that starts with establishing where they are financially.
Personal Capital's survey found that while most Gen Xers say that having a financial plan is the most important thing when it comes to having a secure retirement, many do not know their net worth.
“If you don’t know where you are, it’s very hard to get where you are going,” said Michelle Brownstein, vice president of private client services at Personal Capital.
Get started by first establishing your net worth and then figuring out your budget, Brownstein said.
List all of your assets and debts. Next, write down exactly how much money is coming into your household and how much is going out.
If you fall short, consider adjusting how you spend. That could include dining in more regularly instead of eating out or taking road trips instead of more lavish vacations, Brownstein suggested.
“There’s a lot of shifts someone can make that make a difference in the long term,” Brownstein said.
Also consider cutting your memberships, said Matthew Gaffey, senior wealth manager at Corbett Road Wealth Management, such as to the gym and other clubs, as well as subscriptions to magazines or premium cable channels.
Making those spending cuts can help you increase your emergency fund, which should cover at least six months of expenses. "If you haven't established that yet, that's always priority No. 1," Gaffey said.
Revisit your retirement goals
Once you have a handle on your household budget, then it’s time to assess your retirement plans.
Brownstein suggests coming up with the sum you will need in retirement and planning from there.
“If I need $1 million to fund my retirement and lifestyle at that point, how much do I need to save every year to get there?” Brownstein said.
If you’re behind in your retirement savings or just getting started, be prepared to make some adjustments.
“There can be some trade-offs that have to be made, but the longer someone waits, the bigger those trade-offs tend to become,” Brownstein said.
That could include relocating where you live to having a nonworking spouse re-enter the workforce.
It may also mean cutting back on helping your children with their college funding, which can be a difficult choice for some parents, Brownstein said.
“If there is that decision that I can either afford to pay for my retirement long term, or I can afford to pay for college, retirement should be what’s chosen for most people,” Brownstein said. “You can take out student loans, but you cannot borrow money to fund your retirement.”