Gen X Retirement Strategies

Today, we'll be discussing Gen X retirement strategies.

Hello, and welcome to Money Talks. My name is Ken Wink from Summit Financial Consulting here in Southeastern Michigan. If you'd like more info about what you hear during the show today, give us a call, 586-226-2100, or visit us online, summitfc.net. When you're at the website, be sure to check out our podcast page. We can be found on Apple Podcasts, Spotify, or Amazon Music, and we have a very robust YouTube channel. I'm so excited to talk about Gen X retirement strategies today. I am a Gen Xer. A ton of the info we're gonna talk about today, though, will apply to absolutely everyone. But I think the Gen X ears, they might perk up a little bit more during the show today. But before I jump in, let me introduce my co-host, Tony Shore. Tony, are you Gen X?

I am Gen X. I'm on the older side of the equation. When you say it starts roughly at 1965, well, I'll admit to our listeners right here, they might as well know because I have a big birthday coming up. I was born in 1966.

All right.

So this year is the big 6-0, right?

Oh, man. Can you imagine? Do I seem 60 to you?

No, no, you seem way too hip, which is not a phrase that dates me at all. Well, here's the deal. A lot of people say to me when I tell them I'm turning 60, they say, there's no way, you know, you seem so much younger. And I'm like, yeah, it's my immaturity. It throws people off.

You're nodding in agreement.

Yes. You're not supposed to agree with that. I'm saying it's a perk.

We didn't grow up with cell phones or the internet. We didn't, we didn't wear helmets when we were riding our bikes, head injuries caught up to us. I don't know.

Well, yeah, I am going to be all my kids are out of college now and I'm turning 60 this year, but I still feel like I may be 30. So I'm good. I'm doing good for right now. And luckily, I still have a almost full head. Let's not get carried away.

But good.

No. So but yeah, I am a Gen Xer and proud of it. Yeah, ditto. You're on the younger side of Gen X, though.

I am, but I'm an old soul.

You are. I mean, you know, you. Yeah. Yeah. You're very you're very mature, very much an old soul for for your age. I'll I'll tell you that.

Yeah, I, I, I'm a very proud Gen Xer and, uh, you know, I'm going to get into the show today. Some of the things psychologically that set Gen Xers apart and what people can expect when, when these don't psychoanalyze me today. Yeah, that, that's, that's what you pay the big bucks for. Sure.

Well, our listeners are going to get a lot out of this because there are a lot of Gen Xers out there. And even if you're a baby boomer like my parents and you're listening to the show, you probably have children then that are Gen X. And so or if you're younger, maybe you have parents who are Gen X. So I think the show will cover the gamut. And especially if you are Gen X, um, you're thinking about retirement. I mean, look at me, I'm turning 60 this year. My wife and I are, are, we're like, okay, how are we doing for retirement? Are we on the right path? You've got to be thinking about that, right? I mean, even if I'm my goal, you know, I, you know, if my health and my employer cooperate with this, my goal is to work until at least, my full retirement age of 67. So that's at least seven more years. I'd like to do it until I'm 70, but that's famous last words, right?

Yeah. You are performing at a high level. We're going to continue to do the Money Talks podcast. But I'll, you know, you can count on me. I'll let you know if you're slipping.

As long as my voice holds out, right? That's, I think I can do this job. Yeah. I don't have to remember your name. Do I, Ken? No, nothing. Do I, Bob? When I start calling you Bob, then maybe we'll think about a different ghost.

The wheels aren't off, but one is off.

Right. Okay. So what's different about Gen X for retirement? What do we need to know?

Yeah, so just defining them, they were born between the ages of 1965 and 1980. So the oldest are turning 61. A lot of different, obviously, incomes and life paths. But I read this whole article the other day about Gen Xers and the psychology of Gen Xers. And they said, generally speaking, they are more entrepreneurial, like more so than generations before or after them. And in a lot of cases, hardworking. And they were saying that At a young age, Gen Xers were often put in a position where they had to stand on their own two feet. You could argue with some of the previous generations that there was only one person working in the house. But with the baby boomers, there was a lot of times where, you know, both adults were working. So these Gen Xers, they had... They call it the latchkey generation. You know, they had to spend time at school sort of being loosely supervised before or after school or spent a lot of time alone. And they just had to find ways to entertain themselves and not be bored all the time. But they had a lot more responsibilities. They oftentimes had to cook on their own, you know, do their homework on their own. So a lot of them are do-it-yourselfers. Sometimes that's a good thing and a bad thing, if you ask my wife. Okay. Wanting to do little projects here and there. Sometimes not always the best, but it gets done. But that's just me, of course. But yeah, just a different psychology of a different generation than both the generation before and after it, just because of that somewhat, I don't want to say isolation, but just, you know, hanging out. Yeah.

Right? Yeah, that's a great point. Yeah, yeah, for sure. And I think that obviously it's some of the same, you know, we face a lot of the same pitfalls everybody does, and that's risk and markets. things like that. Um, and we've had a lot of that. I mean, you know, we've seen a lot of that. Obviously, you know, we don't know if there's going to be another black swan event when we get, you know, when I'm ready to retire, I hope there's not another COVID. I hope there's not another COVID for even more important reasons than just my retirement. Trust me. But you know what I mean by black swan event, something major that, you know, like, uh, April of last year or COVID or 2008 when there's a housing crisis or the the dot com bubble burst. I hope we always we hope that we don't retire during those things. But, you know, you hope for the best, but you plan and prepare for the worst. And that's what we all need to be doing. And that's where you come in. Right.

Yeah, yeah, absolutely. And this is where not just Gen Xers, pretty much everyone is feeling really confident right now because the market's almost gone up now for seven years in a row. So we did have a bump in the road in 2022 with the Ukraine situation and then in 2025, like you mentioned, with the tariffs. But Gen Xers, these do-it-yourselfers, Tony, they're getting better. they're getting a little bit too comfortable, I think. And sometimes they're even getting cocky in some cases about just doing everything on their own. And there are some indicators that we have access to through our independent research that are saying we may be due for a healthy drop here at some point in the next year or two. And if someone's getting ready to retire, that could really be a roadblock in 2001 after the September 11th terror attacks. It, the market dropped roughly 50%, and it took four or five years to come back. And then in 2008, like you mentioned, during the financial crisis, from the very top to the very bottom, the S&P dropped about 62%. And then it took, again, about four or five years to come back. For that to happen to someone right before retirement It could be rough. So we're meeting with all of our Gen Xers and all of our clients really and just saying, look, it might be a time to make some adjustments to your risk. It might be time to hire someone like us who will look at your account for you pretty much every single day and do what we can to help preserve and risk manage because you just don't want to lose a big chunk right before retirement. So it's definitely one of those pillars that you want to keep an eye on here as you approach retirement is risk management.

Yeah. Well, and risk management is what you do. I mean, this is a big part of why you need to work with a trusted financial professional, whether that's you, Ken, and Summit or someone else for our listeners out there. But I encourage them to do it. But find one you can trust who's a fiduciary. I'm not going to name names, Ken Wink, but I know a guy. But you're right. I mean, market volatility, we've had three years of huge returns in the market. And so many people, so many of my generation, Gen X, a lot of my friends that I know that are my same age and coworkers, we all have so much money. A lot of people just have everything in a 401(k) and it's a traditional 401(k). So it's all in the market. All their retirement funds. Some people have a million, $2 million in retirement accounts that are all in the market. Well, at some point you might have to, when the market's up, reallocate some of those assets to principal protected assets as well to help hedge against market downturns. So you have to have money that you know will be there to pay the expenses and that money has to last throughout your retirement. You should not, you know, that doesn't mean you take everything out of the market though, right?

Right. Yeah, we don't recommend putting everything out. When we create financial plans for people, there's two main things that we want to look at. Number one is what we call a bucket plan, where we take some money that you know you're going to need, typically in the first few years of retirement, and just make it a little bit safer. You don't have to necessarily put it into a money market, but you don't want it 100% in tech stocks if you know you might need it. And another thing that we always work on is taxes. So a lot of Gen Xers don't realize how much of a factor taxes could potentially play into their retirement. We mentioned almost every show. If you go to the debt clock website, you can see how large our national debt is getting and that for every taxpayer, it's over $300,000 of debt in the United States. Like our national debt is just so large and there's going to be over a trillion dollars of interest that the US government is responsible for this year. It seems to us that eventually taxes are going to have to go up. So why not plan in advance? Why wait till the last minute? Should you be doing IRA to Roth IRA conversions right now? Should you be contributing to a Roth 401(k) rather than all pre-tax 401(k)? These are the kinds of things that it seems like a lot of Gen Xers are ignoring. So we'd be happy to sit down with anyone and just go over those numbers and see if it makes sense. You know, if you're in the highest tax bracket, it usually doesn't make sense. But other than that, there's usually some breathing room there where we can do some tax planning. And especially if you're planning to retire before the age of 65, before you turn on Medicare, you might be responsible for your own health insurance for multiple years. Now we got to look at income-based health insurance. A lot of people don't realize that health insurance costs before age 65 are oftentimes tied to your income. So you've got to If we've got Roth money, you could possibly even get free health insurance. But if you're all pre-tax 401(k) money, every dollar that you live off of is going to be taxable and that's going to make your health insurance. So there's just so many unintended consequences if a person doesn't take a comprehensive approach to their retirement income planning.

Yeah, you're right. And taxes do have to be considered. And that's why I know you've talked a lot on the show before about things like Roth conversions or having a bucket of tax free money as well in retirement. And it depends on your situation and what you qualify for and how much you've got saved, where it's at. Everybody's situation is different. And that's why I know you have to kind of keep the advice broad. But that's why our listeners and viewers out there can need to pick up the phone and give you a call because you're offering at some of the no charge, no obligation consultation. And this isn't an infomercial. This is an educational show. But you really do need a plan in place. Right. Especially if you're Gen X. Because then you're you're close enough now to retirement where you've probably got a good amount saved, hopefully, and you have retirement accounts and you need to know what you need to be doing with them before you get to retirement. Right.

Yeah. Absolutely. Another thing that we'll help and advise people on, and this is another one of those things that Gen Xers don't always do the best job on is budgeting. So leading up to retirement and then also once you're retired, you got to have some kind of a budget. You got to know what's going out the door. So that's what another thing that we will help people do is create a budget, figure out what expenses are needed. going out the door, and then also, if you're saving for retirement, are you saving enough so that you can retire when you want to retire? A lot of people just say, well, like, I'm shocked at the ages that people throw out at me. Like, well, I'm planning to retire this age. It's like, have you put a pen to paper at all? You know, right? You got an Excel spreadsheet somewhere that I can't see? Like, right. You can't just mentally project a retirement date if you can't afford to eat or live or pay property taxes. You know, there's some budgeting that needs to be done before someone retires.

Right. And that's where some of the common mistakes, you know, you hear people say the misconceptions. Well, I'll have Social Security and I've got about 50 grand in a 401(k). So I'm going to retire when I'm 62. Yeah.

Probably not.

Probably not. You might need to keep working a few more years and change things up a bit. And the other side of that coin, and I know you've heard both, right, is that I'm not going to retire until I'm set. I'm going to keep working. I'm not going to retire. I don't have enough money, but that's okay because I'm going to keep working. Well, your job might have something to say about that. They look around you and see how many people over 70 work for your company versus how many 20 and 30 somethings there are. Their ageism is real. And there's, you know, you're not you think, oh, I'm protected by law. They won't let me go because I'm sure they will. They'll just find a reason. There's not. I look around here, I mean, I'm by far the oldest person in my whole division here, the marketing wing here at Gradient, by quite a few years now. So I'm like, oh, when you reach that age where you're looking around going, am I the oldest person here? Right. My headphones messed up. Did you say most knowledgeable person on the team? With age doesn't always come wisdom. I'm living proof of that. But but yeah, yeah, I'm young at heart. That's why I still fit in. So that's that's good. So what else do you want to talk about here today? What else do we need to know for Gen Xers?

Fees. So most people have a really hard time digging into what they're actually paying in fees, and they don't realize how much that can slow them down on their goals for retirement. So people will say, I'm in this 401(k), I don't see any fees. But that's because a lot of the fees are hidden. They'll show you a fee line item on the statement, and it's very, very low. But what they don't see are the expense ratios. that are getting charged behind the scenes on the investments that they've chosen. So we highly recommend that people look at what they're in. If you're just in a target date 2035 fund or 2050 fund or whatever it is, most people don't go peel back the onion and see what actual fees that they're paying. Right. That's something that we really like to help people with because then we can see, OK, you've got all these options, but this one has very high fees. This one is very low fees and they have similar performance. Well, why don't we go with the one with the lower fees? You know, let's check this out. Let's do our due diligence.

Well, for sure. And you have to do the math. You have to look at everything. And I know that that's what you help people do. Make sure everything's transparent as far as what they're paying. And I think people have gotten into a rut with their work related, you know, sponsored plans where they think, oh, yeah, I have a 401(k). I never paid fees. Oh, sure you do. Yeah, there are fees and every portfolio has fees. And so whether you realize you're paying them, whether you read that 20 page prospectus in eight point font or. five point fund to the, you get to the part where fees. That's what I like about you. You're really transparent about, OK, here's what this investment will cost you. Here's what this investment is costing you. Let's look at what they provide. Let's do the math. And, you know, that's the difference between people are like, you know, what's the difference between someone who's wealthy? Let's look at Warren Buffett, one of the wealthiest investors in the world and successful. Um, he lives, he lives actually pretty frugally and he does the math. He doesn't spend money. He doesn't have to, uh, that's one of his big secrets. Um, I'm not saying you have to live like a popper, but at the same time, you have to do the math and, you know, he's not going to overpay for something. Uh, that's, that's the difference right there. And we can all learn from that. Um, I think that's great. Uh, fees are important. Uh, we talked about taxes. What else?

I have this rule of thumb, Tony, and it absolutely does not work for everyone, but just generally speaking, we've got over a thousand families that we take care of here at Summit. So I can see trends. And generally speaking, if you put, and this includes your employer match, this is just total money that goes into your, uh, retirement accounts each year. Uh, If you're saving 10% all in, you're normally gonna retire around 70 or later, maybe late 60s. If you're retiring, or I'm sorry, if you're contributing 15%, then you're gonna retire in your mid 60s, early 60s in a lot of cases. And then if you're doing 20%, most of them end up retiring in their 20s, I'm sorry, in their 50s. So, you know, 20%, 50s, 15%, late 50s, early 60s, maybe mid 60s. And then if you're doing 10%, late 60s, maybe even 70s. So a lot of Gen Xers are, If they do retire, they're going to have to adjust their lifestyle because it just might not be like their working years unless they are really doing a good job of saving. And generally, they are pretty good savers.

But that's just like my little rule of thumb that seems to come to fruition more often than not. I think that's a good rule of thumb. And I'm glad you shared it with us. That's so true. What is something else that Gen Xers are going to face or need to know?

Yeah, so when it comes to contributions, just since we're on that subject, there is something called a super catch-up window. So once people get into their later working years, in a lot of cases, they are making more, or maybe their kids have moved out, so their expenses aren't quite as high. So I just wanted to let everyone know that the Secure Act 2.0 came up with a rule, they call it the super catch-up. So if you're between the ages of 60 and 63, they let you put an extra chunk in towards retirement. So if you're over the age of 50, they give you an extra $8,000. So that increases the limit to $24,500 that you can put into a 401(k). But if you are between the ages of 60 and 63, they give you an extra $11,250 to put in. Whoa.

Whoa. So like they're almost $36,000 you can put in, in contributions to your retirement accounts, your employer sponsored retirement accounts. A lot of people out there like myself are probably going, yeah, I might not be able to afford to put $36,000 of my salary into my retirement account, but Like you say, if your kids are moved out and you're not suffering from lifestyle creep and you don't have an addiction to buying record albums, I'm not talking about any, just throwing that out there as a random example. Completely random. Yeah. So or have some expensive hobby like collecting rare vinyl. But seriously, that's important. And you should put away as much as you can. I know my wife and I are in the mode and we're of the age. I think when you get in your 50s, you should do this. Tell me what you think of this philosophy is every time we get every year we get a raise. Some years it's not much. Some years it's more. But we put whatever that raises. That's how much we increase, how much we're putting into our retirement.

Oh, that's wonderful. Yeah, because that will prevent lifestyle creep. I think that's an absolutely fantastic suggestion, Tony.

Yeah, because if we put it in our checking account, which I call the general fund, it's like the federal government or your state government. They have a general fund and tax money that goes in there or money. You have your own general fund. And just like the government's general fund, it's your checking account and money that goes in there. It's like, poof, it's gone. It doesn't matter. Hey, we've got an extra 10 grand in our checking account this month. This is awesome. If it goes into our checking account, it's gone. I just, at least for my wife and I, the checking account is like this place where money goes to disappear. And our government has that same problem. I think most people's checking accounts have that same problem. It gets spent and then your lifestyle creeps up. And I'll tell you what, as you head into your retirement years, those 10 years before retirement, that's when you want to start really watching your, you know, you really need to look at, okay, I'm going to have to live on a fixed income. So you don't want any lifestyle creep leading into retirement. That's for sure. Right. Yeah.

Yeah, yeah, I agree. I think that's a really great strategy. One, one disclaimer, I forgot to mention about those super catch ups. If you make over $150,000, you can't put it into the pretext anymore, you got to put it into the Roth and not all plans allow those super catch ups, but just didn't want to forget.

Oh, that's right. So there is an income limit. So if you're making over $150,000, what you're saying is you can still make a super catch up, but it has to go into your Roth 401(k) or your Roth option. But I think most companies now have plans with Roths, but not all. Yeah. So and then if you make a lot more, you might not qualify. I don't know how that works. If you can, no matter what you make, I'm not quite sure how that works. But there are rules around Roths that you have to watch out for. But putting money into a Roth 401(k), if your company offers it, isn't a bad idea anyway. Right.

Yeah, absolutely. We love tax diversification. I do think tax brackets are going to have to be higher at some point in the future, both because Social Security is running low on funds, most likely going to have the reserves spent within six to eight years. So, yeah, if you do Roth, there's a good chance that you're going to be happy with that decision, especially if tax brackets go up in the future.

Sure. And what about Social Security for Gen X? When they file, it can really impact their retirement, obviously.

Yeah, absolutely. Just for everyone, this isn't just Gen X, but if you turn it on at age 62, you absolutely can, but they do penalize you and give you a smaller payment than if you wait until age 67 or 70. A lot of people, if you have one spouse that makes more than the other one, it's worth creating a Social Security maximization report. We'd be happy to do that for any of our viewers or listeners because... You're a team, you know, when you're married, you are a team. And when you turn on your social security is really important. And if you turn it on too early, you may really be shortchanging the surviving spouse because eventually one of you is going to pass away. And they usually don't pass away at the same time. So that's a special risk. And we'd love to sit down people and help them figure out when to turn on their social security.

Yeah, exactly. That's awesome. And then we've talked about it before, but really quick before we end the show. What about health care planning for Gen X health care and retirement? You mentioned retiring at 62, which is a really popular age right now to retire. And if you retire at 62, you're not yet eligible for Medicare. Right. So you've got to look at that.

Right, yeah. The retirement benefit of health care has been going away for most Americans, I would argue. So at that point, if you retire before the age of 65, when Medicare turns on, you've got to figure it out on your own. A lot of people go to healthcare.gov, but unfortunately, those premiums are based upon your income. So if you've got a lot in savings that you can spend down to help get you from retirement until age 65, there's a good chance your health insurance premiums will be close to zero. But if you do not have anything but pre-tax money inside of 401(k) and you start pulling on that, that's going to make your taxable income higher and higher, which is going to make your health insurance premiums higher and higher. So you got to be really careful and plan in advance.

Yeah. And there's that word plan. You should not do it without the help of a trusted financial services professional. And these are all things that you look at and can really vary depending on people's personal situations, their personal goals, their personal time horizons. So how can our listeners and viewers get a hold of you, Ken?

Give us a call at 586-226-2100, or you can visit our website, summitfc.net. We would love to have a complimentary phone call or meeting with you just to see if we would be a good fit for you. We'd be happy to put together a social security maximization report, a health insurance planning report, figure out at what year you can retire at. Once you retire, how much can you spend on vacations and gifting to grandkids? We'll help you figure it all out.

I think that's great. And you've helped so many people there in this area of Michigan. I love that with these things we've talked about. A lot of great information for Gen Xers out there today, Ken. Listeners and viewers, thanks for tuning in. That does it for today's episode of Money Talks with Summit Financial Consulting, LLC, and our host, the man himself, Ken Wink. Thank you for joining us for Money Talks. Don't head into retirement without a strategy that addresses both income and taxes. For more information, please contact Ken Wink at Summit Financial, working with people you trust. Call 586-226-2100 or visit summitfc.net. Join us again soon for another episode of Money Talks.