Dear GenXers: Of all the fire drills we’ve experienced in our decades on Earth, it seems a lot of us missed the FIRE retirement memo in our early adulthood: financial independence, retirement anticipated.
Indeed, many Gen Xers – now aged 41 to 56 – are still on the path to financial independence with retirement as a future destination, instead of a current reality. The opportunity to retire and say âsee you soonâ to our bosses and employers has already eluded us. But it’s not too late to make some smart money moves to help achieve financial security in retirement. I share them with you below.
Generation X’s silver story
But first, let’s take a look at where we’ve been and where we are. When we started our careers and our families, retirement seemed unattainable. We were criticized at the beginning of our adult years with the dot.com bubble, the fear of the year 2000 and then the real estate bubble. Financial panic has defined our modus operandi.
To top it off, we’ve since evolved into the forgotten middle kids, sandwiched between three living generations ahead of us (The Greatest Generation, The Silent Generation and the Baby Boomers) and three behind us (Millennials, GenZ and The Alpha Gen). We have a responsibility to care for parents and children while trying to maintain our fragile mental health and financial security.
Also see: How this woman went from six figures in debt and jobless to financial independence
With about a decade or two before our first retirement milestone – Medicare eligibility at age 65 – and the optimal Social Security income milestone at age 70 (the claim age when monthly benefits are the highest), our best course of action is fire drills. It means preparing for retirement, better late than never.
By knowing where you are, what you want and what you need to prepare for retirement, you can achieve financial security. Here’s how I advise clients to do it:
Know where you stand. Your financial situation is best summed up by a statement of net worth. This statement lists all of your assets (what you own) and liabilities (what you owe), with the difference between the two reflecting what’s available after you’ve paid off the debt.
Now that you’ve probably hit your high earning years, ask yourself the following questions:
Are you able to contribute more to your 401 (k) or other pension plan or take advantage of the catch-up provisions if you are 50 or over, which allows you to put in up to $ 1,000 more? than the standard maximum in an IRA and up to $ 6,500 more than normal in a 401 (k)?
Have you diversified your investments by funding a taxable brokerage account, which may offer better tax savings when liquidating investments for income and transferring wealth to your heirs?
Are you on track to pay off your debt when you retire? If not, will you generate enough income from your assets to manage the debt?
Do you know how much you are likely to receive in Social Security benefits? This would also be a good time to find out, by creating or verifying a MySocialSecurity account on the social security website.
Know what you want. It is not easy to disentangle your identity from family and professional roles that demand your attention, time and money. As a sandwich generation that takes care of parents and children while occupying middle to senior management positions, we have limited opportunities to determine what we want now, let alone plan what we want for the future. .
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Our confidence in a comfortable retirement gives up on every decision that strains our financial resources and human capital – the ability to maintain the jobs that demand so much of us.
Many of us have taken a piecemeal approach to our personal finances, collecting financial advice here and there from family members, colleagues, the media, and financial professionals.
Most Americans still believe that financial planners are a luxury only for the rich. According to a study carried out in 2021 by the site Magnify Money, only 30% of Americans use a financial planner create and follow a dynamic financial plan rooted in their values ââand goals, reflecting key areas such as taxes, retirement, investments, insurance and estate planning.
Does this sound like you?
Know what you need. Fortunately, many Americans live 30 years in retirementâ¦ almost as long as our professional careers. As such, we, Generation X, must change our needs or adjust our strategy to support this new era.
Think about how much money you might need to fund activities like travel and exploration. Also, don’t forget to plan for increased health care costs or the possibility of long-term care. According to financial services firm Fidelity, a 65-year-old might need to spend up to $ 300,000 after tax to cover themselves.
Finally, what have you done to prepare to leave the wealth to the next generation? The Gallup polling firm recently reported that less than half of America’s adult population (46%) have a will. And you?
Read: I’m 52, I won’t live past 80, and I have $ 1.6 million. âI’m tired of both the rat race and the politics in the workplace. Â»Should I retire?
We will likely have to revisit these exercises until our retirement goals are met. But by knowing where we are, what we want and what we will need for a comfortable retirement, we can reach our destination faster.
Lazetta Rainey Braxton Certified Financial Planner Lazetta Rainey Braxton is co-CEO and co-founder of 2050 Patrimonial partners and CEO and founder of Lazetta & Associates. She is passionate about amplifying diversity, inclusion, equality and belonging to the financial planning profession and does so through financial planning, public speaking , writing, advice and coaching. She was named in 2021 Crain’s New York Business Notable Black Leader and Executive, as well as one of the Top 10 of Investopedia’s Top 100 Financial Advisors in 2020 and 2021. In all her efforts, she is on a mission to create wealth for the common good. .
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