7 Excellent Ways Gen X Can Level Up Their Money

Not yet in retirement, but past the early career and family-building stage of your life… Gen Xers are the “in-betweeners,” and that’s a great place to be. You’re already in or approaching the height of your career, yet you still have plenty of time left before retirement to make intelligent and impactful financial decisions.

As you continue thinking about ways to optimize your wealth while the finish line draws nearer, here are the seven things Gen Xers should do to set themselves up for a successful retirement.

#1: Work With Your Advisor to Determine the Proper Amount of Investment Risk

As a Gen Xer, you’re in a pretty advantageous position regarding investing. You may have more discretionary income than when you were younger, yet you’re still 10, 15, or maybe even 20 or more years away from retirement.

Time is on your side, which means it may be worthwhile to continue (or start) investing in riskier investments. You have more time to recover from potential losses than those soon transitioning to their post-work years. Having a higher tolerance for risk may give you the flexibility needed to seek higher returns and achieve your growth goals.

Everyone’s tolerance for risk is unique, so it’s essential to work with an advisor when determining how much risk your portfolio should take on. You’ll likely need to balance maintaining and protecting your wealth without stagnating it. Even if you’re willing and able to bring on more risk, it’s still necessary to maintain a diversified and goal-focused portfolio.

#2: Start Thinking About Your Retirement Lifestyle and Spending Plan (If You Haven’t Already!)

When you hear the phrase “preparing for retirement,” you are likely considering a savings strategy. But have you put much thought into what you want your lifestyle in retirement to look like? Creating a vision for retirement is vital since that vision will help dictate your future spending needs and give you more tangible goals to work toward.

Perhaps you don’t want to quit working cold turkey. If that’s the case, you’re certainly not alone! More and more seniors are opting to work in retirement. Around 32% of the labor force comprises seniors between 65 and 74. That’s a 12% increase over the last 20 years.¹ Working in retirement helps retirees develop a routine, fill their time, socialize with others, and feel more purposeful. Not to mention, having an extra source of income may help ease any financial stress you may be feeling.

Aside from deciding whether you’ll pick up a part-time job, you’ll likely want to start thinking about where you’d like to live in retirement if you’re going to travel, any hobbies you may pursue, etc. All of these have the potential to impact your future spending needs. Once you know what you’d like to accomplish in retirement, you’ll have a better baseline for estimating your monthly expenses.

Are they in line with your current retirement savings strategy? Or do you think you’ll have a gap between your projected expenses and retirement income? If so, you still have time to solidify your retirement income plan and discuss strategies with your advisor to fill any potential gaps.

#3: Pay Down Debt

The more debt you pay, the less money you can put toward your tax-efficient retirement accounts. And as you near retirement, the fewer recurring financial obligations, the better.

While there’s still plenty of time between now and retirement, make a plan for paying down your current debt obligations.

These could include:

• Credit card debt
• Mortgage
• Student loans (of you, a child, or a grandchild)
• Personal loans
• HELOC or other lines of credit
• Auto loan

If you’re unsure where to start, identify the loans with the highest interest rates first. These tend to be credit cards and personal loans. Work on paying those down as soon as you can. Then, work your way down the list to lower-interest items like your mortgage or car loan. Coming up with a debt repayment plan is something you and your advisor can work on together as well. 

While controlling current debt is a significant first step, try to be mindful of any debt obligations you’re considering between now and retirement. If you can avoid obtaining more debt, you’ll be able to make your retirement income stretch further.

#4: Conduct an Insurance Audit

Insurance is one of the best tools you have at your disposal. Policies like life, disability, health care, and long-term care can help provide a safety net for you and your loved ones should something unexpected occur.

You obtained a term life policy years ago, or your current employer offers group coverage. Whatever the case, you may not have considered your coverage in a while. But your needs evolve as you experience life changes — marriage, divorce, growing family, job promotion. What worked for you five or ten years ago is likely no longer adequate coverage for your financial life today.

You and your financial advisor should work together to determine if you’re maximizing your benefits or need to add additional policies, adjust coverage, or drop policies that no longer serve your best interest. Remember: Being overinsured means your hard-earned income goes to insurance companies when it would be better used to pad your savings or brokerage accounts.

#5: Max Out Your Retirement Contributions

Your peak may earn years may still be ahead of you, or you’re already experiencing professional success. Wherever you are in your career, continue (or start!) to take advantage of any employer matching your company offers. If you can, consider maxing out your retirement contributions — at least as high as your employer will match. Otherwise, you’re leaving free money for retirement on the table.

If you aren’t working or don’t offer an employer-sponsored retirement plan, consider opening an IRA or Roth IRA (if you qualify for one). 

In 2023, the contribution limit for a traditional IRA is $6,500. If you’re 50 or older, you can contribute an additional $1,000, for a total of $7,500.²  

#6: Pad Your Emergency Fund and Create a Strong Cash Reserve

Everyone needs a safety net because something unexpected will eventually happen to your home, car, job, health, etc. Rather than risk drawing down your retirement savings in the face of a financial emergency, prepare proactively with a substantial cash reserve.

These are extra funds set aside that shouldn’t be tied up in your retirement savings accounts or investment portfolio. You should have fast, easy access to them should an emergency arise, but they should be tucked away enough that you aren’t tempted to spend it on non-emergency things. 

#7: Planning for Care Expenses

Caregiving for a parent or other older adult is an act of selfless love. Many Gen Xers, especially women, are in a position where they’re either already caring for an aging loved one or preparing to care for one in the future.

If this applies to you or your spouse, you must start planning for the financial implications and challenges caregiving can create. Caregivers may bypass promotions at work or cut back hours to accommodate their caregiving responsibilities. If an aging parent doesn’t have much savings, the caregiver may tap into their savings or investments to help cover a loved one’s living costs. While you want to be sure you’re providing everything you can to make your aging loved one comfortable, it’s essential to still consider your own financial needs.

Ready to Level Up Your Money?

As a Gen Xer, you’re in a prime position to prepare for the retirement of your dreams. If you haven’t yet started working with a financial advisor to optimize your retirement savings strategies, now is a great time to do so. Feel free to contact our team and learn what Partners in Financial Planning can do to help you level up your money today.

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^{2Taxpayers should review the 401(k) and IRA limit increases for 2023}