15 Steps Gen X Needs To Take Right Now To Prepare for Retirement

Gen X has faced their share of financial battles, from several stock market meltdowns, the implosion of the real estate market, and the end of pensions being offered by many employers. 

It's the first generation that has had to save for retirement, mostly on its own. Couple that with higher housing costs and an overall cost of living, and things may look bleak.

But there are ways to get ahead financially now that can get you back on track. Here's what to do to make sure you’re prepared for retirement.

Your first step is to know where you are right now. Review your existing financial situation, including your retirement accounts.

You should pull the hard numbers and recognize your debt, income, expenses, and spending. This information can make it clear what you need to do next.

Speaking to a financial advisor is the next big step to preparing for retirement because you’ll gain more insight into where you stand. 

These professionals also have the experience to know the strategies available to you to build your retirement portfolio now and to project how it may last through retirement.

Financial advisors can discuss options and opportunities with you, not just showcase your problems. They are problem solvers.

It can also be time to realize that you cannot continue to meet everyone else’s financial needs. You may have kids in college or just starting out on their own, or you may find yourself needing to support your parents now more than before.

You can't take care of yourself if you continue to spread yourself too thin. Examine your spending on others to find opportunities to cut back if necessary.

Having a pile of debt isn’t just limiting you by the amount of that monthly payment. Instead, it’s growing day by day due to high interest rates.

If you hope to be debt-free by the time you reach retirement, you’ll need a plan to get there, which means building an aggressive debt repayment plan.

Retirement may still be a ways off for Gen Xers born as late as 1978, but what if you could retire early?

If you have some money saved and a plan, now is the perfect time to amp up what you’re doing to achieve a better future for yourself. With some help from a financial advisor, it may be possible to pull together a strategy to get out of work sooner.

As you inch closer to retirement age, the amount of time you have to bounce back from an adverse market or gone-wrong investment deal is smaller. That means it may be time to take a closer look at your current risk.

While you may have most of your retirement savings in equities, as you age, you may need to reallocate your portfolio so it’s less exposed to market volatility.

A financial advisor can help you make adjustments now and for various stages of retirement. Adjusting where your money is going (either too aggressively or not aggressive enough) is something to evaluate on an ongoing basis.

Talk with your financial advisor about the potential tax savings or tax reduction strategies available to you. For example, you may want to discuss any pre-tax retirement contributions you could make to lower your overall costs.

Regardless of what changes you make to your investment strategies, be sure you understand the tax implications of the changes.

As you plan for retirement, consider not just your health insurance (Medicare takes care of some of that) but other insurance you may need.

A common area of concern is long-term care planning. If you need long-term care later in life, you may have to sell assets to pay for it. However, long-term care insurance is a complicated product that may not pay for your needs. 

Discuss long-term care insurance with your financial advisor and make a plan that meets this and other expected health care challenges.

When you evaluated the risk level of your investments, you may have diversified your portfolio as a matter of course. But if you are still highly concentrated in stocks, you may want to consider diversifying. 

You will want to be invested in a variety of vehicles, such as real estate, CDs, mutual funds, bonds, and stocks. You likely want to ensure some liquidity at any given time.

When you established your retirement plan, you probably took into consideration your expected income during those years. Now, it’s time to reassess where you are.

What do you expect from Social Security, investments, retirement savings, and other sources? Do you own real estate or other assets you plan to sell? Take a closer look at where your income is likely to come from and potential avenues to add to this.

Due to the higher cost of living and the numerous challenges many Gen Xers have faced, it may be necessary and beneficial to put off retirement for a few more years.

For some people, that means working at their current jobs longer, but for others, it may mean working part-time or as a consultant instead of a 40-hour workweek. The key here is to determine if you need to work longer and adjust your strategies to match.

If you haven’t done this already, it’s time to buckle down and put as much money as you can into your retirement accounts. That means investing anything extra you have in taxable and non-taxable accounts.

The good news is that if you are over 50, you can invest more than the usual limit in your retirement accounts. These are known as catch-up contributions.

For 2024, the IRS allows anyone to contribute up to $7,000 in an IRA and up to $23,000 in 401(k) or 403(b) plans. Those over age 50 may contribute up to $7,500 more. And be sure you’re taking advantage of an employer match if it’s offered.

Working with your financial planner, create a tax-efficient withdrawal strategy, outlining which investments you withdraw first to keep your tax costs as low as possible.

For example, if you have socked away most of your retirement savings in a traditional IRA, you will have to pay taxes when you begin to make withdrawals. 

Consider paying the tax now and converting some of your retirement portfolio to a Roth IRA. When you withdraw those funds later, they are tax-free.

Tightening your budget may seem like something you’ve had to do numerous times over your lifetime as a Gen X citizen. Yet, now is the time to do so to get you to retirement with the most savings possible.

Reevaluate what you spend money on now and, carefully balancing quality of life with investing, make better decisions for yourself.

If you’re a business owner, you must also consider what retirement means for you, the company, and your employees. Do you have an exit strategy in place? Is it time to consider how much of your retirement is coming from business assets?

Work with your advisor to prioritize your future so your company can flourish even if you step away. That’s especially important if you plan to continue to receive income from it for some time.

As Generation X heads toward retirement age, it’s time to take control now so they can see a better tomorrow. 

By paying off your debt, investing wisely, and having a solid retirement plan, you can overcome the tumultuous economic times they’ve lived through.

And you don’t have to go it alone. If you know what your needs are, ask family and friends for recommendations or find a fee-only advisor through the National Association of Personal Financial Advisors (NAPFA) website.