5 Money Habits Gen X Should Adopt Right Now for a Richer Retirement
Written by
Gabrielle Olya
Edited by
Kristen Mae
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Members of Generation X are now between 45 and 60 years old, which means that for some, retirement is just around the corner. While creating a robust retirement savings plan is a priority, it’s also a crucial time to focus on estate planning and ensuring your overall financial health. That includes diversifying investments and paying off debt to set yourself up for a stable retirement.
With retirement on the horizon, these are the financial habits Gen X should adopt now.
1. Increase Retirement Contributions
As you get closer to retirement, increasing your retirement account contributions annually can help you lay a solid foundation for your golden years.
“Balancing enjoying life now with saving for retirement can be challenging,” said Diane Bambace, a financial advisor at Manske Wealth Management. “The best place to start is with your employer’s retirement plan. Contribute at least 3% to 4% of your salary, then gradually increase it by 1% to 2% each year. Most people hardly notice a 1% change, but over time, it makes a big difference.”
She also points out that if your employer offers a match, you should be contributing at least enough to get the full match, since it’s basically free money. “Also, consider the Roth option in your 401(k),” she said. “Taxes are currently at historically low rates, and there’s no telling what they’ll be in the future, so taking advantage of tax-free growth now is a smart move.”
2. Maintain a Diverse Investment Portfolio
Having a well-diversified investment portfolio can help shield your assets from market swings.
“Staying well-diversified across all sectors of the market will help reduce risk and will help your portfolio grow over the long term,” Bambace said.
3. Pay Off Any Existing Debt and Avoid Taking on New Debt
Debt can significantly reduce the money you have available to you in retirement.
“Carrying debt often means having less readily available cash,” said Gina Stoddard, chief of staff at Broad Financial. “Borrowing money comes with a legal obligation to repay it — plus interest — potentially reducing the funds you can freely use. Implementing a debt reduction strategy is considered essential to achieving financial freedom.”
You may not be able to pay off all of your debts during this phase of life, but you should at least aim to pay off high-interest debt.
“If you have high-interest credit or personal debt, these would be the first things to look at,” said Chad Gammon, CFP and owner of Custom Fit Financial. “Eliminating your mortgage could be another, but there’s a chance that you have a historically low [interest rate], and it may be something to consider keeping, even in retirement.”
4. Review Insurance Coverage, Estate Plans and Healthcare Savings Opportunities
If you don’t currently use a Health Savings Account (HSA), now may be a good time to open one.
“You can invest in this account and save for future qualified healthcare costs,” Gammon said. “It also has a $1,000 catch-up contribution opportunity if you’re 55 or older and qualify.”
In addition, you may want to consider utilizing life insurance as part of your legacy planning if you’re not already.
“If you’re married and have a family or plan on starting a family, look into a term life policy,” Bambace said. “You can get great coverage at a reasonable price. After your kids are done with school, you can cancel the policy.”
5. Catch Up on Savings If You’re Behind
If you’re age 50 or older and haven’t saved as much as you’d like for retirement, be sure to take advantage of “catch-up” contributions.
“It could be easy to forget that there is a $7,500 catch-up for those 50-plus and a newly created catch-up of $11,250 for those ages 60 to 63,” Gammon said.
This article is part of GOBankingRates’ Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own? Share it on our hub — and you’ll be entered for a chance to win $500.
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