Members of Generation X, who straddle a fairly wide age range, from late 30s to early 50s, are feeling the crunch of being responsible for their children and their parent’s needs. How will they ever get a handle on their savings for retirement?
U.S. News & World Report reminds us in its article “Essential Strategies for Generation X” that with the right strategies, Gen Xers can find a money-life balance.
Keep in mind that Gen X has been financially devastated twice: when the tech bubble burst and again during the financial crisis. This makes these individuals dubious about the future.
Let’s look at three strategies for those in the new sandwich generation to help make certain that the financial needs of their aging parents and children are met, and at the same time, ensuring that they don’t sacrifice their own financial future.
For You. Determine your financial health by calculating your net worth. This includes your savings, personal investment accounts, retirement plan accounts, and real estate, minus credit card debts, your mortgage and miscellaneous debt. Take off any items that won’t appreciate or be consumed in retirement, like a car or jewelry. Then review investments to be sure they’re performing consistently with your needs and expectations. Develop a plan to tackle debt and identify existing and projected expenses. Once you have all this information, use a basic retirement calculator to see if you’re on track to meet your retirement spending needs.
A basic calculator probably won’t let you to input different scenarios or make detailed assumptions. Most will assume that you will need 70-80% of your current salary in retirement, but this may not be the case, if you’re a big saver.
Create a contingency plan for premature death and disability. Ask an attorney to draft your will, trust and other estate planning documents. Make sure that your will includes naming a guardian for your minor children, so that you get to name the person who raises them. Have the attorney create powers of attorney and powers of attorney for health care, so that you and your partner are prepared for incapacity.
For Your Children. Look at the resources available to fund your children’s education. Don’t put your retirement plan in jeopardy, by paying for an expense you can't afford, including your children's college. Be open minded about state schools, or having your kids attend a local college for two years, then transfer to another college for a “brand name” diploma. Also create a trust and so that older more mature trustees will handle financial decisions, investments and distributions.
For Your Parents. See where your parents are financially, because you may need to factor unexpected expenses into your plan, if your parents need financial assistance. This will save time in the future, if you know where to track down this information. Ask if they have an estate plan, and if they do not, have them meet with your estate planning attorney to have a plan created. Find out what kind of long-term care insurance they have in place.
With their somewhat pessimistic outlook—which is not undeserved—many Gen Xers are more focused on a work-life balance than amassing wealth. That’s good, but they need to develop good financial habits on a realistic scale.
To learn about how good financial habits coupled with a sustainable estate plan can help you plan for life® and take care of your family, explore our blog and visit our website to schedule your free consultation today!
Reference: U.S. News & World Report (March 28, 2019) “Essential Strategies for Generation X”