Retirement, 401(k) concerns lead to successful strategies

Recent research found that Generation X is particularly nervous about retirement finances.

Jun 23, 2024 - 19:30

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Retirement, 401(k) concerns lead to successful strategies

Originating from the Revenue Act of 1978, the 401(k) replaced pensions as the dominant retirement savings option for American workers during the 1980s.

Unlike defined-benefit pensions, a 401(k) is tied to financial markets, which fluctuate in value. This fact carries with it some risk for people planning for retirement.

The timing of the transition from pension plans to 401(k)s means Generation X workers were the first to start their careers with the new retirement approach.

And many of those people are feeling jittery. A recent Corebridge Financial study found that just 22 percent of Generation X workers are confident they won't outlive their retirement savings.

The 65 million Americans born between 1965 and 1980 are likely in their prime years for earnings and savings, and are now seeing retirement in the not-too-distant future.

Preparing for retirement as it more rapidly approaches involves being sure a few key strategies are in place.

Visualizing retirement expectations

It is important to understand that retirement expectations are not the same for everyone. Individuals have different financial circumstances and priorities.

That's why it is wise for people to first visualize a number of specific elements they expect from their retirement experiences.

This can start with contemplating the answers to some questions, such as where a person thinks they will be living and with whom they will be spending their time.

Then, of course, the financial calculations begin regarding monthly expenses and income during retirement.

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There are other things to think about as well.

"You should also consider the possibility of living a long life and how longevity presents exciting new opportunities," wrote Bryan Pinsky for Retirement Daily. "You'll be able to continue meaningful relationships with family and friends. Maybe you'll also want to explore and have new experiences. Maybe you'll help out in the community or take on a project like renovating an old home."

Once a person's retirement is visualized, the next step is to talk with a financial professional about implementing a plan.

The Corebridge study found that Generation X workers who use financial pros are far more likely to express confidence in their retirement strategies.

"You'll want to consider everything from Social Security to health care costs to workplace retirement plans to personal savings and investments," Pinsky wrote. "Getting professional guidance to help you turn what might sound like a tangle into a clear path forward is one of the most impactful steps you can make in securing your retirement."

Retirement plan charts and graphs are pictured on a desk. As Generation X nears retirement, there are options to consider.
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A monthly income without a pension

Since most people in Generation X do not have pension plans, an additional guaranteed monthly income beyond a Social Security check is something to consider.

One option is an annuity, a contract typically between a person and a life insurance company in which the insurance company makes a series of regularly spaced payments in return for a premium or premiums the person has paid.

"An annuity is one of the most reliable strategies to create a 'personal pension' that can provide protected income for as long as you live," Pinsky wrote. "Many of today's annuities offer valuable benefits specifically designed to help people grow their future income — and then generate guaranteed lifetime income when they're ready to retire."

Life is full of changes, so it's also important for retirees to revisit their retirement strategies regularly to be sure they remain appropriate.

"The oldest members of Gen X will turn 60 next year," Pinsky wrote. "While there are many years of work ahead for most in this generation, it's important for Gen X-ers, if they haven’t already, to actively plan and prepare for what their new kind of retirement will be."