Retirement Planning Checklist: Generation X

Move over flannel shirts, grunge music and reality that bites. Gen X is ready for retirement planning.

Generation X retirement

Move over flannel shirts, grunge music and reality that bites. Generation X, now ages 35 to 54, is growing up. Fully in the throes of middle age (don’t shoot the messenger — I’m one of you!), Generation X is marching toward retirement age, whether they’re financially prepared or not.

If you haven’t yet started — or you know you have some ramping up still to do — there is time left to start saving as much as possible before AARP comes knocking. Take this opportunity to review this eight-point checklist to either get started on your journey or to make sure you’re not missing out on any opportunities as you move forward with your retirement plan.

Quiz: Which Generation Do You Belong to Based on Your Savings Habits?

1. Calculate How Much You’ll Need

Many workers assume a 10 percent annual retirement plan contribution is enough. If you haven’t carefully considered how much income you’ll need each year during retirement — along with how you’ll get there — you might be surprised at how long your assets will last.

A 4 percent annual withdrawal rate is generally considered a safe rate, said Katie Brewer, certified financial planner and president of Your Richest Life, which provides investment advice for Gen X and Gen Y professionals. “For every $1 million in assets saved, that equals $40,000 a year in cash flow,” said Brewer. If you currently live off of $200,000 per year, she added, a $1 million nest egg isn’t going to cut it.”

How much will you need to satisfy your retirement planning needs? Brewer suggested running your numbers through a retirement calculator or planning to visit a fee-only financial planner to make sure you’re on track.

Learn: 10 Common Retirement Planning Mistakes

2. Start Saving Early

“Time is your best friend,” said Peter Creedon, CFP with Crystal Brook Advisors.

“For example, a 35-year-old that invests $5,000 per year in an IRA for 33 years at 8 percent should have approximately $729,750,” he said. “Meanwhile, a 50-year-old that invests $15,000 per year into a 401k for 18 years at 8 percent should have approximately $561,753.”

To break that down, the investor who started at age 35 had to save $105,000 less over the course of his investing life to earn over $165,000 more. “This is simply the time value of money,” said Creedon.

3. Map Out Your Retirement Plan

Retirement planning is far from the only financial consideration on a Gen Xer’s mind. “There are a lot of other expenses on the horizon — like a wedding, children or a home purchase — that careful planning and saving can smooth out,” said Trent Huston of OC Wealth Coach.

Huston suggested a systematic savings plan be set up in a non-retirement account so immediate financial needs can be approached head-on. “After they have set up a savings plan for those purchases, it’s not so difficult to continue the savings plan as they get closer to the ‘R’ word,” he said. “Additionally, any funds they don’t use for those earlier milestones can be left in the account for retirement.”

4. Think Retirement First, College Second

Those in the older Generation X cohort are in their prime earning years. “They’re likely dealing with college costs for their children and may have less than 15 years before retirement,” said Andrew Novick, CFP with The Investment Connection.

The investment intersection between college and retirement can be tricky to navigate. “Conventional financial planning wisdom says to save for retirement first because there are other ways to fund college, like loans and scholarships,” said Novick. “In practice, parents want to help their children, and often assume they have enough time left to build up retirement savings.”

Unfortunately, added Novick, this strategy doesn’t always pan out. Unexpected health issues, a job layoff or just improper planning can waylay any retirement planning considerations.

5. Review Your Investments

“You have to have a strategic mix of stocks, bonds, cash, and alternatives that fit your long-term goals and your ability to handle risk,” said Brewer. An investor’s asset allocation should change over time and get more conservative as an investor gets older and closer to retirement age, she added.

At the same time, you also have to know yourself and understand what level of volatility you’re comfortable taking on. “Are you someone who works for the state because you’d rather get paid less but have more of a safety net? Or are you more of a risk taker?” said Brewer. Knowing your tolerance for risk can help you plan an allocation that you’re comfortable with.

Consider a target date portfolio that automatically adjusts as one gets closer to retirement age.

6. Consider a Health Savings Account

“A health savings account can be a great place to pick up a bump in tax-benefited savings if you’re maxing out other vehicles but make too much to contribute to an IRA,” said Tony Pampel, CFP and founder of True Life Financial Planning. “The contributions are tax deductible, they grow tax free, and — if used for medical expenses — can be accessed tax free,” said Pampel. “Even if they’re not used for medical expenses, the funds can be accessed without penalty after age 65, although ordinary income taxes will be due.”

A family can contribute up to $6750 in 2016. There’s a catch-up provision, too, which Gen X savers can take advantage of in coming years. Making the maximum annual contribution limit can add up to several hundred thousand dollars, even when compounded at a conservative 5 percent over a 25-year span.

“That’s money they didn’t have to pay income taxes on while working,” said Pampel. “Even better, the odds of them needing some of those funds for medical needs are higher than when they were younger. Chances are, they will be able to use the withdrawals for medical expenses and pay no taxes on the back end, either.”

7. Protect Your Family

For many people, the ages between 35 and 54 are life’s busiest and most stressful. “Your career is in high gear. You might have also started a family,” said Commie Stevens, managing director of strategic and financial planning for Beacon Pointe Advisors. “This is when you should start saving to make sure your family is protected if something happens to you.”

Stevens suggested a back-up plan that can be tapped to care for loved ones in case of unforeseen emergency. “Life insurance is quite affordable and can help replace the income you would have otherwise produced,” she said. “An estate plan is likely to cost a few thousand dollars but is vital to carrying out your wishes if you aren’t there to care for your family,” she added.

8. Design Your Lifestyle

Planning to switch from a day job to a life of leisure is about more than just money. For some, the transition can be surprisingly overwhelming.  “If you haven’t made plans for what you’re going to do with your time, you could be in for a shock when you start retirement,” said Susan Krauss Whitbourne, professor of psychology at the University of Massachusetts Amherst and author of the “The Search for Fulfillment.”

It takes a minimum of two years to plan for the emotional changes that come with retirement, said Whitbourne. Many within Gen X have children who are getting older and need less immediate attention. Take advantage of that new freedom, suggested Whitbourne, and start getting social.

“Identify leisure pursuits that you enjoy and start building them into your day now so you start to look forward to them,” she said. “It’s a significant life change, but if you plan it right, it’s something you’ll enjoy much more than you may realize is possible.”

Keep Reading: Why Millennials Are Better at Saving Than Any Other Generation

  • Juanie

    That graphic is really helpful. I still feel so overwhelmed to start saving for retirement when I’m drowning in student loan debt. One step at a time, thanks again GBR! Great content!

    • Peter J. Creedon

      You are not alone in feeling overwhelmed Juanie, I see a lot of people fighting the same battle as you. If you need guidance/consultation please feel free to reach out to me either at or call me at 631-828-6488. I would love to give you a free consultation and see how we could improve your situation.

      – Peter J. Creedon, CFP®, CLU, ChFC