A quick Google search for "Generation X and retirement" results in a mix of relatively negative predictions for these 30- and 40-somethings' financial futures. But if you're a Gen-Xer -- or a concerned parent or grandparent of one -- take heart knowing there's still plenty of time to get things right. And while Gen-Xers may face more challenges than other generations, they at least seem to have a better understanding of what it takes to retire successfully.
The key is to take action and attack the four common hurdles that Generation X faces in the quest to save for retirement.
Hurdle 1: Student loan debt
College costs have skyrocketed during the past 30 years. Student loan debt didn't hinder Baby Boomers or the Greatest Generation in the same way it does Gen-Xers. Yet college-educated, working adults with outstanding student loans can successfully save for retirement, and here's how: Make budgeting a priority. Create a monthly budget with a breakdown of where your money will go. This provides predictability when you feel stressed about managing student loan debt and saving for your financial future.
Hurdle 2: Saving for kids' college education
If you want to make your children's college savings a high financial priority, find most of the money within your budget by tightening your belt, rather than using your retirement savings. It's reasonable to adjust your budget to earmark a little from funds that would otherwise be part of your monthly retirement contribution, if need be -- just not too much. Remember that your kids can chip in as well. They can work during high school and contribute their earnings to a 529 college savings plan or a similar college savings account, work part-time during college, get scholarships and grants, and take out student loans. Students looking to reduce college costs even more can attend a community college for two years prior to transferring to a four-year university. Whatever approach you take, don't prioritize your kids' college savings over your own retirement. Unlike a student who needs money for school, you can't take out loans or receive grants to fund your golden years.
Hurdle 3: Fear of investing
The financial crisis of 2008-2009 scared some investors out of the market and instilled in them a general wariness of investing. While this fear is understandable, note that the history of the stock market shows an overall upward trajectory. There have been dips, dives, leaps, and peaks; but decade after decade, the market has trended upward and, on average, beat inflation. Rather than concentrating on immediate-term volatility, focus on a long-term investing strategy. With that mentality, it's OK if your portfolio takes some losses and gains. In fact, dollar-cost averaging (making the same contribution amount at regular intervals, like a monthly or bi-weekly 401(k) contribution) is a shrewd way for long-term investors to beat volatility without being beaten down.
Hurdle 4: Not saving enough
Maybe your budget can't accommodate very much in the way of retirement contributions right now. There's an easy way to ramp it up gradually: automate it. Enroll in your employer's 401(k) right away if one is offered to you. Many 401(k) plans allow participants to enroll in gradual automatic contribution increases that make changes feel less drastic.
Some plans also offer an automated rebalance feature, which will help keep your investments on track with your goals. Rebalancing enables you to capture profits on investments that have grown to comprise a larger percentage of your account(s) and purchase more of those that subsequently make up a smaller percentage.
If you're uncertain how much to contribute at first, start with enough to receive your full company match (if it's offered). Eventually, you should be saving at least 10% to 15% of your income, with an eye toward ultimately maxing out your contribution limit. Maximize your plan savings.
If you don't have access to a 401(k) or a similar employer-sponsored plan, open an Individual Retirement Account.
Despite some of the bleak financial predictions for Generation X, there is time to get on track with saving and investing. An investment advisor can help you further address these hurdles and devise a strategy to help you get where you want to be
