personal finance

Gen X: How to Make Sure Your Future Self Remains Funded

If you’re a Gen Xer, like me, now might be the right time to talk to a financial professional to learn more about how to adjust your retirement planning strategy.

As a member of the “latchkey generation,” the days of letting yourself in through a back door of the house after school, tossing a Hot Pocket in the microwave and yelling “I want my MTV” are but a distant memory. Now that you’ve reached your 40s and 50s, it’s time to turn that DIY-attitude toward taking care of your future self and your loved ones — financially.

In honor of National Retirement Security Week (the third week of October), this is a great time to focus on and level-set your financial plan to ensure your future self doesn’t run out of money in retirement. No matter whether you’ve been saving for decades or you’ve just started putting money aside for your golden years, you’ll want to make some adjustments as retirement gets closer.

The first step toward proactively preparing for retirement is determining how much you’ll need — and how much you’re on track to save. You can use new tools like retirement calculators to get a ballpark figure, or work with a financial professional who can help you run the numbers.

If there’s an unsettling gap between your projected savings and your retirement goals, you’re not alone. More than 70% of Americans say that a lack of retirement savings is their biggest barrier to financial security. You’ve still got time to make some financial changes that can help close the gap, though the sooner you can get started the better.

And even for those whose savings are on track, that’s only half the battle. There’s still the equally critical task of working with your financial professional to put a sound retirement income plan in place, to make sure those hard-earned savings last as long as you do.

Here are a few money moves to consider along the way:

1. Boost your savings

The best way to have more money in retirement is to save more money for retirement. And one of the best places to put those savings is into your 401(k) account at work, as a pre-tax contribution and with tax-deferred growth. This year, you can put up to $19,500 into your 401(k) account, and those age 50 and older can put in an additional $6,500.

If you have a high-deductible health insurance plan, you might also consider putting money into a health savings account. Cash invested in an HSA has even more tax benefits than a 401(k), since it goes into the account tax-free, grows tax-free, and can be withdrawn tax-free for medical expenses — now or in the future.

And once you’ve reached critical savings levels and are closer to those retirement years, there are whole new sets of products that you and your financial professional can use to help stabilize value or provide a buffer to protect against market volatility coming at the wrong time.

2. Consider working longer

If you’re concerned that retirement is approaching and you haven’t yet reached your savings target, postponing your retirement — even by just a year or two — could make a huge difference. Not only will you get a few extra years’ worth of savings, but you’ll also postpone your need to start drawing down your savings, and it could help you delay tapping into Social Security before the optimal ages to maximize income.

Another option might be to take on part-time work or consulting work once you’ve left your full-time job. The recent COVID-fueled embrace of remote work by corporate America means you may be able to land a flexible gig that you’re able to do on your time — at home.

3. Build your own ‘pension-like’ retirement income plan

One way to make sure that you never run out of money in retirement is to have a source of protected income. Your parents’ and grandparents’ generations typically relied on pensions to provide this type of security, but traditional employer-provided defined benefit plans have become increasingly rare.

That’s even more the reason why the time is now to speak with a financial professional about taking matters into your own hands — to create a pension-like retirement income stream that can help you protect the outcomes that matter most. Even if you nailed the savings accumulation stages, gone are the days of relying on the old “4% rule” of systematic withdrawals from your investment portfolio as a safe way to ensure your money lasts. As more and more Americans seek to ensure that their savings will fuel their longer, healthier lives, they are realizing that this so called “safe withdrawal” rate is anything but.

The good news is that your financial professional can help you evaluate a whole new set of protected income solutions that are born of the sound financial management practices employed by the traditional pension plans of yesteryear. Those can include index-linked investment strategies that offer you income with levels of protection and opportunities for growth, even after income begins, along with insured lifetime income if account values go to zero, or fixed products that can provide guaranteed daily growth of future income regardless of market performance, without sacrificing the flexibility to adapt as your needs change. You now have more options than ever to find the right solutions that enable you to put a portion of your savings to work today, to add greater security and confidence that your retirement income will be there as long as you need it.  

4. Be flexible

While having a retirement plan in place will make it less likely that you’ll run out of money in retirement, it’s also important to periodically revisit — and adjust — that plan as retirement gets closer and after you’ve transitioned into life after work. As we’ve learned in the past year, the market, and life, can be unpredictable.

Remember, you’re simply making estimates now, but once you’ve settled into retirement you’ll have a clearer picture of your true expenses, which may be higher or lower than you’d planned. Either way, building some flexibility into your retirement plan is a great way to ensure that you’re financially prepared for the next stage of your life.

Your future self will thank you.

About the Author

Dylan Tyson

President, Prudential Retirement Strategies, Prudential Financial

Dylan Tyson is president of Prudential Retirement Strategies, which delivers industry-leading retirement strategies for growth and protection. Retirement Strategies serves more than 2 million customers and provides retirement income of more than $15 billion annually. Tyson received his bachelor’s with high honors from Stanford University, and an MBA from the Anderson School at UCLA. He is a CFA® Charterholder.

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