Financial Planning Made Easy For Gen X
Date: November 9, 2020

Financial Planning Made Easy For Gen X

Generation X is the next American cohort to enter retirement. Right now, Gen X, born between 1967 and 1982, are just beginning to enter the decade before traditional retirement, as the oldest of them is 53. But in the next decade, they’ll begin to retire and the youngest members will enter the pre-retirement stage.

But Gen X’ers in Greeneville, Tennessee and elsewhere face challenges their predecessors didn’t. Gen X is often referred to as the “sandwich generation,” whose financial responsibilities include not only their children but their parents. To top that off, Gen X entered the workforce in a recession, grew to maturity at a time when companies were cutting their pension plans and were the first generation to be hit with rising student debt loads and rising real estate prices in many areas of the country. 

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All these financial pressures show up in their planning for retirement. Gen X’ers median retirement savings is just $69,000. An average withdrawal of 4 percent of this amount in retirement (a standard withdrawal percentage designed to make retirement savings last a lifetime) equals just $230 per month. 

Not only that, but nearly three-fourths of Generation X feel that they should do more to plan for their retirement. But what’s the best way to plan for retirement – and given the financial and time pressures of Gen X, what’s the easiest?

Frankly, the easiest way is to work with a CERTIFIED FINANCIAL PLANNER™ Professional in Greeneville, TN. Financial plans can maximum your retirement savings, yes, but a comprehensive financial plan includes much more. 

Your individualized financial plan is designed to help you achieve your goals. A larger house? Starting your own business? Longer or more extensive vacations? The steps you take all depend on what the end game is. 

A CERTIFIED FINANCIAL PLANNER™ Professional is required to have years of experience in working with clients toward their goals. 

A CERTIFIED FINANCIAL PLANNER™ Professional is also required to demonstrate expertise in asset management, tax strategies, cash flow management, and much more. Here is an itemized list of the individual aspects of a comprehensive financial plan and how a CERTIFIED FINANCIAL PLANNER™ Professional can help.

Cash Flow Analysis

The first step in a financial plan is to analyze your monthly cash flow, analogous to how a business’s cash flow is analyzed. How much do you spend versus the amount coming in? 

No one can have a healthy financial life if their spending exceeds their income, so a cash flow analysis ensures that any overspending issues are pinpointed and addressed. 

Your financial advisor will also advise you to set up an emergency fund for sudden expenditures, such as a car repair, if you don’t already have one.

Cash flow analysis also includes monitoring your accounts steadily, to ensure that your expenditures align with your income and your goals.

Retirement Planning

Your financial advisor will analyze your current retirement planning and make suggestions. One common suggestion for members of Generation X is to maximize their yearly retirement contributions. If you have a matching 401(k), for example, you are leaving money on the table if you don’t contribute. 

These contributions are also made pretax, and thus lower your overall taxable income for the year. If you don’t have a 401(k), traditional individual retirement accounts (IRAs) also possess a tax advantage; the amount of the contribution is generally tax-deductible.

Gen X’ers who are 50 or older should also consider increasing their contributions to include the “catch-up” contributions the Internal Revenue Service (IRS) allows for people 50 and over, to further their tax-advantaged retirement savings. 

Individual retirement account (IRA) annual contributions are currently $6,000, but those 50 and over can contribute an additional $1,000 per year. The 401(k) annual contribution limit is currently $19,500, but those 50 and over can contribute an additional $6,500, for a total of $26,000. 

Asset Allocation

All investment and retirement portfolios require an asset allocation strategy designed to maximum returns while ensuring enough stability for goal achievement.

Generally, this means allocating assets between stocks and bonds/cash instruments. Stocks typically provide the highest return of any investment, but stocks are also relatively risky, because their value fluctuates. Bonds and cash instruments provide relatively low rates of return, but can offer relative stability of principal as well.

Asset allocation decisions also need to factor in your risk tolerance level, your age, your goals, any annual changes due to market performance and other relevant considerations. 

College Funding

Over the past several decades, the cost of higher education has risen exponentially. How will you pay for your children’s higher education, especially since you also have to save for retirement, pay a mortgage or rent and may still be paying off your own student loan?

A financial advisor can suggest many strategies. One is to invest in a tax-advantaged 529 educational savings plan. At maturity, these can be utilized for a wide variety of educational costs. 

Estate Planning

While it’s no one’s favorite part of a comprehensive financial plan, estate planning is necessary to provide for your family and your own end-of-life care.

The centerpiece of an estate plan is a will. A will specifies what you want to do with your assets. Without it, no one knows where you want your assets to go in the event of your death, or to whom (or which organization). Not only that, but if you die without a will, your assets could be tied up in probate court for months or even years, leaving your loved one with no assets in the interim. 

Comprehensive estate planning also includes designating powers of attorney for financial affairs and medical affairs. Powers of attorney give the designated person the authority to make decisions for you should you become ill or incapacitated.

Estate planning is not only for older people, by the way. Anyone could meet with a sudden accident or illness. An estate plan provides contingency planning for an emergency and security for both you and your loved ones.

When looking for a CERTIFIED FINANCIAL PLANNER™ Professional, be aware of the advantages of using a fee-only advisor. A fee-only payment structure will ensure that your fees are not commission-based, and the recommendations not influenced by any commission incentives. 

At Sapiat Asset Management, we specialize in working with Gen X’ers. We use a unique, personalized process to identify your specific needs. Our knowledge of your financial situation is a big part of the foundation that drives our relationship with you. Contact us today for a complimentary consultation.

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Sapiat Asset Management is a Fee-Only, Independent, Registered Investment Advisor (RIA), specializing in goal-oriented financial planning and investment management for Gen X Individuals & Families, their Businesses, & the Trusts that benefit them and their heirs.

Steve Dick