It's never too late to start planning your retirement. Practicing good money habits and best practices can give you some momentum. Ultimately, playing catch-up will give you more choices when you reach retirement age.
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While Gen Z individuals have plenty of time to build their nest eggs, Gen Xers don't have as much time. Here are strategies that can help Gen X catch up on their long-term financial goals.
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Contribute as much as possible to your retirement accounts
“Gen Xers looking to maximize their retirement savings can start by maximizing their 401(k) or IRA contributions. The under-50 bracket may contribute a maximum of $23,000 to a 401(k) and $7,000 to an IRA. Gen
While some people contribute manually to their retirement accounts, it is also possible to let these contributions happen in the background. This way, you won't forget to contribute to your retirement accounts every month. Then you're more likely to max out your retirement accounts each year.
“Automatic contributions help with steady savings and increasing premiums at the end of the year, or when you get a raise, you can continue saving without disrupting your spending habits,” Kullberg said.
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Adjust your investment strategies
Mason Jones, director and affiliate expert, has a portfolio of more than twenty high-earning websites at NDR. He believes in prioritizing assets that are proven to reward long-term investors.
“For Generation Xers, a few important investments can really contribute to building a solid pension. Diversification into low-cost index funds can provide steady growth over time. Real estate is another strong option: it can generate passive income and provide long-term appreciation. Contributing to a Roth IRA is also beneficial, especially because Gen Xers can take advantage of tax-free withdrawals during retirement,” Jones said.
Although bonds are less risky, they tend to underperform stocks and real estate, especially over the long term. You don't need to take big risks, especially if you're a Gen
Kullberg recommends investing in multiple asset classes based on your risk tolerance and preferences.
“Gen Xers will want to diversify their portfolios with the right mix of stocks, bonds and assets that match their risk profile. Funds such as index funds, target date funds and dividend stocks can provide growth with a healthy dose of risk management. Others may also want to explore investment properties or REITs to finance income-producing portfolios.”
Real estate and real estate investment trusts (REITs) are some of the income-producing assets you can choose from. It is also good to consider how each of these assets is taxed. For example, you won't pay as much tax on qualified dividend distributions as you do on REIT distributions. Interest and REIT distributions are taxed as ordinary income, while qualified dividends are taxed as capital gains.
Postpone retirement
If you stay in the labor market a little longer, you will have more time to build up your savings. Your money doesn't have to stretch as far either if you continue to earn a steady salary. Jones recommends that Gen Xers acquire new skills and explore additional sources of income while they are still employed.
“One of the biggest lessons I've learned in building wealth – both through affiliate marketing and more traditional investing – is the importance of diversification. I've learned that investing isn't just a matter of putting money into something and hoping for the best. It's about being proactive and involved. The more I educate myself, the better equipped I am to make decisions that align with my goals,” said Kullberg.
She highlighted some of the additional benefits of delaying retirement: Ultimately, you can earn and save more money in the long run by sticking with a career a little longer.
“If you only work a few years, you give your investments some time to recover and you don't need as many years of dipping into savings,” she said. “You can also increase your Social Security benefits if you want [delay withdrawing]. The extra two or three years you delay retirement can mean a huge difference in retirement income.”
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This article originally appeared on GOBankingRates.com: Retirement for Gen
