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Generation X and Retirement Planning

| April 07, 2017
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Although not everyone born 1960 and 1980 is poor, jaded and scarred by the Great Recession, many members of Generation X do face financial challenges that are unique. According to one article by Market Watch, Gen Xers dealt with many economic downturns which left them with less money to save for retirement. They may be sending children to college at a time when college tuition is more expensive than ever before. Experts also point out that the debt of Gen Xers is higher than that of older generations. Gen-X members have assets double their debts while members of the Silent Generation have assets 27 times higher than their debt. In other words, Gen X one of the few generations that is not going to do better than the previous generations. In order to accumulate more money and avert a retirement crisis, there are a f ew ways Generation X can capitalize on their strengths.

Maxing out a Roth IRA
On the positive side, Gen X is more highly educated than previous generations. Their median household income, according to Pew Research, is higher than that of their parents at the same age. The ideal scenario is to max out a Roth IRA. People who earn too much money to contribute to a Roth IRA can still contribute to a taxable retirement account such as a traditional IRA or 401(k). Even high income earners are eligible to convert money into a Roth IRA by paying the income taxes on the conversion.

Refinancing a mortgage
Unlike baby boomers who are closing in on retirement very quickly, Gen Xers still have time to pay off a mortgage before retirement. Experts say many Gen Xers bought homes just before the housing crash, which left them with negative equity in their homes. Instead of selling at a loss or doing a short sale, those who can stay put can refinance to a 15 or 20-year mortgage at a low interest rate so their homes will be paid off by retirement. Another option is to refinance at a lower rate to a 30-year mortgage, but investing the surplus money each month instead of spending it.

Other challenges that are unique to Generation X is the fact that one-fifth of Generation X men earn less money than their wives. In some cases, the woman is the breadwinner with a husband who serves as a stay-at-home dad. In such cases, it’s possible to contribute to a spousal Roth IRA. Gen Xers are report they are behind on retirement saving, which is why they can benefit most from help from a certified financial advisor or financial planner. A survey by Magid Associates found only 64 percent of Gen X believe in the dream of homeownership, education and doing better than their parents compared to 73 percent of baby boomers and 71 percent of Millennials in their 20s and 30s. Working with a good financial advisor may be able to help Gen Xers jaded about the American Dream.

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