According to studies, the generation X is one of the least prepared generations when it comes to retirement. It turns out the generation X actually only saves about 9.7% of their income which is about the same as millennial's (MW). You would expect someone who is a lot closer to retirement to be more concern with saving and making sure that they'll have income when they finish working but this isn't the case. One reason this might be is they have more financial responsibility and debt obligations. According to MarketWatch they have the highest credit card debt than any other generations which carries some of the highest interest rates. So more debt leads to less opportunities to save. So what can Gen X do to ensure they are doing enough for retirement?
1.) Contribute to 401k program
- If your employer offers a 401k program you should be participating in order to contribute pre-tax money. Depending on your tax bracket this could save you a significant amount of money while allowing you to participate in the growth of the stock market. Usually this money is taken directly out of your paycheck and you can select different investment alternatives you feel best fits your goals and objectives.
2.) Open an IRA
- While you should be making contributions to your companies 401k program you can also open an IRA account in order to invest and save more for retirement. These accounts offer tax deferred growth opportunities for your money and allows you to participate in the stock market and make your own investment decisions.
3.) Take advantage of your employers match program
- Most employers offer to match a certain percentage of your contribution to your 401k. This is a great way to boost your savings for retirement as you allocate a higher percentage of your paycheck to be taken out your employer will match you up to certain limit. This additonal amount compounded over time can be incredibly helpful when trying to save and invest for your future.
4.) 401k Catch Up Contributions
- If you are over 50 years old and feel that you need some additional help saving for retirement and you already have a 401k set up, you can make catch contributions. This limit was just raised in 2020 for $6000 to $6500 meaning you can can contribute an additional $6500 and save more in a tax deferred account.
5.) Review your Social Security Plans
- Being able to determine when you plan to claim social security will allow you to better understand the income needed for your retirement. While you can begin to claim social security benefits at age 67 delaying your benefits to age 70 will increase the payout by 8% each year. Given where you are at when it comes to your savings you can determine if you have the ability to wait longer to claim these benefits which could give a boost to your income in the long run.