The Gen X Guide to Retiring Well

Defining Your Retirement Success

Every investor has their own idea of what a comfortable retirement looks like. Plan your post-career days based on your unique goals and financial situation, focusing on the things that are most important to you.

First, determine your goals and financial objectives. What do you want to do when your full-time working days end, and how much do you need to save? Next, understand your time horizon—the length of time you'll need your money to last. Then take stock of your current financial situation, including sources of income, how much you have saved already, your spending and your liabilities.

Once you've figured out your goals, time horizon and current financial situation, you can assemble a plan to help you reach your retirement goals.

Getting to know your priorities

Before you begin the goal-setting process, it can be helpful to identify your top financial priorities for retirement. These preferences should inform your strategy throughout the planning process.

Your priorities may include:

• Preserving or enhancing your quality of life. You'll probably need to grow your purchasing power if you want to keep your lifestyle as is or improve it.
• Increasing your wealth. You might want your money to grow, possibly to build a financial legacy. In that case, your plan may emphasize preserving your current wealth while investing for growth.
• Making sure not to run out of money. You may need to live off your savings for a long time, so you need a plan that helps ensure you don't spend too much too fast.
• Spending every last dollar. You may want to make the most of your wealth during your lifetime. If so, take extra care not to underestimate how long your assets need to last.

After considering your big-picture priorities, you can begin mapping out what you want your retirement to look like.

Consider the following:

Retirement age
Many people decide to retire around 65. Some people choose to work beyond that point to delay drawing down savings or because they love the work they do. Others can't wait to get out of the workforce and choose to retire early.

It's true you can withdraw funds from your individual retirement account (IRA) and 401(k) penalty-free at age 59½, and you can start claiming Social Security benefits at age 62. But the earlier you retire, the less time you'll have to save. And you'll need more money to support yourself through a longer retirement—so you may need to save more now and invest for growth.

Geographic location
When you step down from your job, do you want to stay in the same town or city you live in now or move elsewhere? Consider the social and financial benefits of both options, including proximity to friends and family as well as cost of living.

If you're staying put, do you want to keep your current home? Consider the advantages and disadvantages here as well. For example, planning to downsize or rent may reduce maintenance and free up money for other goals.

Activities and social life
Staying active is critical to physical and mental health. Plan the activities that will fill the days you no longer spend at work. Who do you want to pass the time with and what do you want to do? Will you pursue your passions? Focus on your hobbies? Travel? Contribute to your community?

Work
More than half of Gen Xers plan to work either full- or part-time in retirement.² Some people may find a job in retirement out of necessity, to continue earning an income and reduce the amount they need to withdraw from retirement accounts. Working part-time or consulting also may be a way to stay engaged in your field. Alternatively, you may want to explore volunteer work or an encore career.

For Gen Xers, retirement may be anywhere from a couple years to a couple decades in the future. When you envision it, be as precise as possible: Set clear financial objectives that support the specific post-career life you want to live. And be flexible with your vision, in case you need to adapt to changing circumstances and financial realities.

_{²Source: 22nd Annual Transamerica Retirement Survey, Transamerica Center for Retirement Studies, 2021.}

Identifying your investment time horizon

This is the length of time you'll need your money to last to achieve your goals. It may be equal to your lifespan, or it may extend beyond that if you plan to leave a financial legacy. Your time horizon can have a big impact on your portfolio asset allocation—the mix of stocks, bonds and other investment categories you'll need to reach your goals.

How do you work out what your lifespan will be? Unfortunately, it's not an exact science. Genetics can play a role, so considering your family health history and longevity can help you make an educated guess.

You can also consider actuarial tables of average life expectancies based on age or date of birth. For example, an average 60-year-old man can expect to live about 20 more years, while an average 60-year-old woman can expect to live almost 24 additional years, according to the Social Security Administration.³

While these figures can be a good jumping-off point to estimate life expectancy, your plan needs to account for the possibility that you could live longer. Life expectancy tends to increase over time, along with advances in medicine. It may be wise to assume you'll live longer than actuarial tables suggest, if you want to avoid running out of money in your lifetime.

For couples planning retirement together: If your spouse or partner is expected to live longer than you are, use their time horizon as the basis for your joint retirement plan.

_{³Source: Social Security Administration, 2020 Actuarial Life Table, as of 12/13/2023.}

Adjusting your goals

Retirement plans are dynamic. As you age, your circumstances and goals may change. For example, you might decide you want to move to a more expensive city near your kids when you retire and choose to push back your retirement date so you can afford the extra costs.

The sections below take a closer look at the challenges Gen Xers may face. They also cover the components of a retirement plan that can help address those challenges over time. These components—from income planning to investment and savings strategies to withdrawal scenarios—can be adjusted as necessary to meet your changing needs.