retirement

Painless retirement savings tips for Gen X

Which generation faces the toughest challenge with saving for retirement?

Several recent studies suggest Generation X is in the most trouble. A Pew Charitable Trusts study found that Gen X hasn't saved enough, and in addition has accumulated too much debt to be on track for a comfortable retirement. To make matters worse, Gen X also took the hardest financial hit during the Great Recession, losing nearly half -- $33,000 on average -- of their already low savings.

A survey by PwC revealed that among all age groups, Generation X was most challenged by competing financial priorities, hindering their ability to save for retirement. More than one-third of Gen Xers admitted they might have to dip into their retirement savings to pay for expenses unrelated to retirement.And a third study by Limra also concluded that Gen X was most concerned about having enough retirement savings.

But that doesn't mean their prospects are bleak. "The studies themselves were fair and well-researched, but I didn't like the message being translated that 'Gen X is doomed,'" says Brian Frederick, a Certified Financial Planner professional and principal at Stillwater Financial Partners in Scottsdale, Ariz., who works with clients in their early 30s to late 40s.

Painless retirement savings tips for Gens X, Y

Gen X and Gen Y have more obstacles to wealth than older generations, says Kile Lewis, a Chartered Retirement Planning Counselor and co-CEO and co-founder of Alpharetta, Ga.-based oXYGen Financial. "It's highly improbable that they will have a pension; they will experience even more divorces than their parents, and they will change jobs more … than baby boomers," he says.

The most common advice dispensed by experts is to save 10 percent to 20 percent of one's salary to be retirement-ready decades down the road. But not all planners subscribe to this tough investment regimen for the younger generations.

"Forcing Gen Xers to tighten their belts and put aside a predetermined percentage of income to sock into savings is negative reinforcement, smacking of deprivation," says Michael Kitces, a multicredentialed partner and director of research at Pinnacle Advisory Group in Columbia, Md.

Instead, Kitces proposes painless retirement savings tips for Gen X. Why not put half of any future raises into savings while enjoying the rest for spending, he suggests. Gen Xers and their younger brethren -- millennials, also called Gen Y -- are at the threshold of potential career advancement, he adds. Since potential future earnings represent their greatest asset at this stage, Gen X and Gen Y's salary increases can be used both for savings and to further their education, which in turn will increase their chances for promotions. "By putting a sizeable chunk of that money into savings, you'll end up with more money by investing in yourself and then save," says Kitces.

"Even small increases in base earnings today can have a tremendously magnified effect over a lifetime," he says. With earnings increases, "There's an opportunity to produce a wealth increase more than 10 times that of socking money into a Roth (individual retirement account), compounded for decades."

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