As a financial advisor in Tennessee, we’ve seen one financial fact in Generation X clients over and over. They’re worried about retirement. Frankly, they’re not sure they’ve saved enough. Some wonder if they’ll even be able to retire. 

It’s a fact, both in Tennessee and nationwide, that Gen X has often saved less for retirement than the Baby Boomers did at their age. The average Gen X household only has $40,000 saved for their later years. 

The financial freedom you’ve been yearning for starts here.

But as we turn the calendar to 2024, the oldest member of Generation X will be entering their late 50s. Even the youngest Gen X’er will be in their 40s. All of us need to start thinking about Gen X financial planning for a financially comfortable retirement.

Facing the Challenges in Retirement Planning

As a member of Generation X and a fiduciary financial advisor in Greeneville, TN, I’ve had plenty of opportunities to see the challenges we face when trying to save for retirement. But I also work with Gen X’ers every day to overcome those challenges.  

How many financial challenges? Let me count the ways. As a Gen X’er, you may have had children later than previous generations. As a result, you may be raising children – and saving for their higher education – at the same time as your aging parents need help. 

In addition, household debt levels have been skyrocketing as long as you’ve been an adult. If you have high credit card or other debt, it can hurt your ability to save for retirement. Lately, inflation has been climbing steeply. Your budget may not stretch for retirement planning. You may have even withdrawn the savings or retirement funds you did have to meet obligations or deal with inflation. 

Student loan debt is another headwind. Gen X was the first generation to have significantly higher student loan debt than previous generations. Many Gen X’ers haven’t been able to save as much as they’d like for retirement because they’re paying off student loan debt first.

Gen X retirement planning also has been impacted by a major change in how Americans generally saved for retirement. From the 1950s to the 1970s, many Americans had defined benefit (DB) retirement plans, such as a pension. With a pension, your retirement income is fully funded by employers, with a guaranteed monthly income. 

But, beginning in the 1980s, many companies switched to defined contribution (DC) plans, such as 401(k)s. Employees with these plans need to save for their own retirement. Many employers match employee contributions, and the plans provide tax advantages to participants. But to reap these rewards, employees must first save themselves. Many Gen X’ers haven’t been able to. 

Gen X has also changed jobs more frequently than previous generations did. The 1950s-1960s model was “start in one company, work decades in it, and retire with a pension.” That hasn’t been our model. 

Steps to Plan for Retirement

So what is a good model to jump-start a comfortable retirement? Here are some strategies we recommend for Gen X’ers.

1. Work with a financial advisor to create a plan

At Sapiat Asset Management, we can help you in multiple ways. We will review your budget to see where your cash flow is going and how it can be best managed for your goals. We review your existing retirement plans vis-à-vis your goals and advise you on how much you need to save and how to get there. We provide targeted advice on investments, assets, college savings, and more.

Knowing your individual goals are crucial to getting you to the retirement you want. You may want to stop work at 50 and spend the next several decades visiting beaches and grandchildren. Your Tennessee neighbor may be so happy running their own business that they never want to stop. We can help you make a plan for you. 

We’ll also discuss your time frame for retirement because that’s also one of the most important pieces of information in creating a plan. If you expect to retire in 20 to 30 years, your retirement portfolio should be carefully chosen for maximum long-term returns over time. If you want to retire several years down the road from 2024, you need a plan that minimizes the risk to your existing portfolio and preserves the money you have. 

2. Manage debt to increase savings

If you have outstanding credit card or other debt, pay it down as much as possible. The less you spend on monthly debt service, the more you can save and invest for retirement. It’s a good idea to review your spending to reduce as much nonessential spending as you can. Then, focus on using that money to start funding your savings. 

Don’t go into unnecessary debt going forward. The more debt you have, the more you’ll be spending on monthly debt payments rather than saving and investing.

3. Maximize your retirement savings

Fortunately, there are several ways to grow your retirement savings. First, if your employer offers matching contributions in their retirement plan, make sure you participate in that plan. If you don’t, you leave money on the table. 

Second, save as much as you can. In other words, if your employer matches 100 percent of a contribution up to 6 percent of your salary, saving that 6 percent will power your savings to 12 percent of your salary every year.

Third, save as much as you can in tax-advantaged retirement plans, either ones you are already in or ones you open in 2024. If you are 50 years old or over, the amount you can contribute to these plans increases, so use that if you can. (These are known as “catch-up” contributions.) 

For 2024, all individuals can save up to $23,000 in 401(k) plans. But if you’re 50 or over, you can contribute an additional $7,500 each year, for a total of $30,500.  You can save up to $7,000 in an Individual Retirement Account (IRA) starting next year. Those who are 50 and over can save an additional $1,000 every year, for a total of $8,000.

At Sapiat, we believe anyone can become financially secure if they commit to the right process. We specialize in Gen X because we are Gen X ourselves. Learn how our fee-only financial advisors in Tennessee can help you get the retirement you want.