3 major financial mistakes of Generation X
Everyone makes mistakes with their money at some point, including Generation X. Even though they may have made mistakes with their money thus far, it does not mean they are doomed to keep making those same financial mistakes. They can make changes and corrections, and they still have enough time to get things in order. Gen X, those who were born between 1965 and 1980, tend to make the same types of mistakes across the board. Many are woefully unprepared when it comes to retirement planning. Where do their biggest financial mistakes lie?
Lack of Savings
Undoubtedly, this is the biggest problem facing Generation X. When you consider that Social Security will not be available in its current form when these individuals retire, the situation looks even worse. In fact, according to estimates, the Social Security benefits will likely only be payable in full until 2037. At that point, they will only be able to pay out around 76% of the scheduled benefits.
Generation X can do a couple of things to help. They can start increasing their retirement savings right now, and they may want to reduce the amount of education savings they have for their children. Many in Generation X have saved mainly for their children’s education, not bothering to worry about their own quality of life after they retire. It’s time to rethink the savings plan and perhaps talk with the children about how they can contribute to the cost of education.
Another way that they can save more is by eating out less. Too many in Generation X rely on eating out at restaurants and fast food shops, often on a daily basis. They do this rather than going to the grocery store to make their own food. By eating at home more often, you can save a staggering amount of money over the course of the year, all of which could go into your retirement fund.
Not Matching Employer Contributions
Generation X does not often contribute as much as they should to their 401(k) plans, which means they do not get the full benefit of their employer’s contributions. Many employers will match 50 cents on the dollar for up to 6% of the employee’s contribution. However, 33.3% of employees do not contribute enough to take advantage of this, and they are losing a substantial amount of money because of it. Instead, make sure you are matching the contribution to its fullest so you are not losing money.
Not Using Roth IRAs
Roth IRAs could be a fantastic method of saving, but too few in Generation X are doing it. They are only relying on their savings and their 401(k) plan without considering after-tax brokerage accounts. It’s time that they changed their thinking.
It is not too late for Generation X to recognize and correct these mistakes they have been making with their investments. When you start making changes now, it could mean that you have hundreds of thousands of extra dollars available for you when you retire. Everyone should be able to retire comfortably, so rethink your strategy now.