Procrastination is rarely a good thing. When it comes to retirement planning, Generation X can’t afford to wait until the last minute. According to a recent Pew Charitable Trusts study and a PwC survey cited by Bankrate.com, Generation X is struggling to save for retirement. Moreover, experts say Generation X was hit hardest by the housing crash, which means many of them won’t be able to rely on the equity in their homes when they retire. It’s not too late for people in their late 30s and 40s to improve their retirement outlook and start planning for a secure future.
Make saving enjoyable
One key is to make saving a joy instead of a painful experience. Most people avoid pain and gravitate toward pleasure. According to Bankrate.com, encouraging Gen-X’ers to put aside 10 or 20 percent of their income backfires by giving them a feeling of deprivation. Instead, experts suggest commiting half of future raises into savings. View your balance on a yearly basis so you can experience the pleasure of seeing how your money has grown.
Automate your finances
Another retirement planning strategy is to have money automatically deducted from your paycheck and funneled into a 401(k). If a company match is involved, save up to that level. Otherwise, have money deducted from your paycheck and moved into a Roth IRA. A married individual who doesn’t have earned income can open a Spousal Roth IRA as long as the spouse has earned income. Automating your retirement savings makes it easy.
Avoid lifestyle inflation
Another key aspect of retirement planning is to know what kind of lifestyle you want to have in retirement. Then you need to have enough of an income stream when you are older to support your desired lifestyle. By avoiding “lifestyle creep” or lifestyle inflation, you can make up for lost time. In other words, choose a simpler and less extravagant lifestyle. Buy a home that you can easily afford to pay off in 15 years instead of 30 years. With no mortgage to pay in retirement, you can more easily live on dividends generated from mutual funds and individuals stocks.
Although it’s not necessary to know where you want to live in retirement or how you want to spend your days, it is good to set some financial goals. If you plan to financially support children or grandchildren in retirement, you’ll need to have more money invested. A financial advisor can help you set priorities for retirement and make sure you are in a balanced position and are more prepared for the days to come.