Financial Experts Warn Gen X About Key Retirement Pitfalls

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Financial Experts Warn Gen X About Key Retirement Pitfalls

‘It Won’t Be Enough’: Financial Experts Warn Gen X About Key Retirement Pitfalls

As the oldest members of

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(those born between 1965 and 1980) approach retirement, financial experts warn that many in this group may not be as prepared as they think. Generation X faces unique challenges as they prepare for retired life, from shortfalls in savings to unexpected costs that may arise.

Here’s what experts say Gen Xers need to know to avoid these key pitfalls and ensure a more

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Many Gen Xers are significantly behind in their retirement savings. A recent study by Northwestern Mutual found that only 7% of Gen X respondents have saved more than 10 times their annual income–the amount most experts recommend for a comfortable retirement.

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Perhaps even more concerning, over half of Gen X respondents say they have only saved three times their annual income or less. Fidelity recommends having at least three times your annual salary by age 40, six times your salary by age 50 and eight times your salary by age 60 to stay on track for a comfortable retirement.

This shortfall in savings is compounded by the fact that many Gen Xers do not have a

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. According to Allianz, only 30% of Gen Xers have mapped out how they will fund their post-work years, the lowest rate among all generations surveyed.

A common misconception among Americans is that taxes decrease in retirement. However, financial experts caution that many Gen Xers could face higher-than-expected tax burdens. The reason? Most have their retirement savings in tax-deferred accounts, like

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, which require taxes to be paid upon withdrawal.

“The big problem is that a lot of them are going to be faced with a lot of taxes in retirement,” Jonathan Dane, founder and chief investment officer for Defiant Capital Group in Pittsburgh, told U.S. News. He says one way to mitigate this is to stop putting money in tax-deferred accounts and transition to Roth accounts, which allow for tax-free withdrawals.

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Another concern is healthcare costs. While Medicare provides comprehensive coverage starting at age 65, it doesn’t cover everything. Long-term care expenses, like assisted living, typically aren’t included. Experts suggest considering long-term care insurance or using a health savings account (HSA) to prepare for these costs.

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Financial planners warn that many Gen Xers don’t clearly understand their spending habits. “They’ve been getting a paycheck for the last 40 years and they just don’t know what they spend,” Zach Ungerott of Hightower Wealth Advisors told U.S. News.

Knowing when and how much to withdraw from savings can make a significant difference. Starting withdrawals at age 59 ½ allows penalty-free access to funds in tax-advantaged accounts, but withdrawing too much too quickly risks prematurely depleting savings.

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Many Gen Xers have outdated estate plans that don’t reflect their current wishes. Reviewing and updating wills, beneficiary designations and other documents is essential to ensure assets are distributed as intended.

Investment strategies may also need adjustment. While Gen X has benefited from stock market gains, experts suggest diversifying into more stable assets like bonds or annuities to protect against market downturns.

With retirement on the horizon, Generation X has limited time to close savings gaps, reassess strategies and prepare for potential obstacles. Working with a

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can help this generation create a plan tailored to their needs, ensuring they are better positioned for a secure retirement.

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