The Gen Xer’s Guide to Retirement
By Brian Famigletti, Managing Director & Head of Marketing
A new generation is nearing retirement. Generation X is defined as those born between 1965 and 1980. That means the oldest members of Gen X will turn 60 this year.
Here’s what Gen X needs to know about an exciting chapter of life that is quickly approaching.
Assessing Obstacles
Younger generations may be more open to risk. But for investors, it is crucial to curb this tendency as you age. The closer you get to retirement, the more important it is to reduce portfolio risk, in order to ensure savings will last. Younger workers can afford to take on more risk to potentially earn greater returns. But those nearing retirement don’t have the same luxury of time.
Aging investors might consider moving assets into less-risky investments like bonds, CDs, or “income stocks” with a history of high dividend payments. A common alternative among retirees is annuities, often with a living benefits rider that guarantees a fixed income for life.
One aspect of financial planning that is important to monitor is the fees charged on retirees’ investments. While they may seem negligible upfront, these costs can gradually erode account balances over time. As you near retirement, it’s important to monitor fees closely and ensure the expenses associated with your accounts remain reasonable.
Depending on the type of accounts you have, taxes can also impact your savings. It may be worth consulting with a tax professional to ensure that your investments are as tax-efficient as possible.
Related reading: Navigating the Ever-Changing World of RMDs
Social Security & Medicare Considerations
Another pressing topic for Gen X retirees is the matter of Social Security and Medicare benefits. The choice of when to start taking Social Security benefits is an individual one, but as you approach the age of eligibility for disbursements, there are some general best practices to keep in mind.
First of all, there can be consequences to taking benefits as soon as eligibility begins at age 62. For instance, a monthly benefit could be reduced to as much as one-third of what it would be at the full retirement age, or age 67 for Gen Xers. For those who are still working and exceed certain income limits, benefits could be further reduced. On the flip side, waiting to take disbursements until age 70 can add as much as 8% per year to your benefit income.
Meanwhile, for Medicare, benefits typically kick in at age 65. But the program isn’t one-size-fits-all. Beneficiaries have to handle deductibles, co-pays, and coinsurance. The program also doesn’t cover ongoing long-term care costs like assisted living.
It is crucial to consider how these benefits fit into your unique financial situation well before retirement.
Some Shifting Strategies
As you enter a new season of life, it can be useful to review your investments with a trusted financial advisor to ensure they match up with your time horizon and risk tolerance.
It’s also vital to ensure that your retirement accounts have designated beneficiaries to mitigate any confusion or legal hassle. As part of a bigger picture of comprehensive estate planning, designated beneficiaries, wills, and trusts create a clear roadmap for your loved ones.
With these strategies in mind, Gen X could be on its way to a smooth sunset chapter. Looking for help with planning out the financial details of your retirement? The advisors at Griffin Asset Management can help.
