Retirement, a generational perspective

You’ve seen the frightening surveys that say Americans are ill prepared for retirement, but let’s take a more positive and proactive approach. No matter how old you are, it’s time to jump-start your savings plan. To help out, I’m going to break it down by generation.

--Millennials (born 1980-2000): Ask anybody who is already retired for advice on saving (or, for that matter, ask anybody who is 10 years from retirement with woefully underfunded investment accounts) and the answer will be almost unanimous: Think about and save for retirement finances as early as possible! Start by understanding your cash flow -- track what’s coming in and going out -- so you can find the money to fund your various financial priorities.

For many, paying off student loans will be at the top of the list. Your goal is to grab hold of and accelerate the process as much as possible. But you should also try to squeeze a tiny bit of money out of your cash flow and direct it toward retirement saving, especially if you work for an organization that offers a match. Ideally, you can start by saving about 6 percent of your salary for retirement early in your career. Even if you begin at a lower level, try to get in the habit of retirement saving and increase the percentage every year or as your cash flow allows.

--Generation X (born 1965 to 1979): In some ways, you could have had better luck. Many of you were especially vulnerable during three huge market meltdowns (the 1987 stock market correction and the bursting of the dot-com and housing bubbles). Depending on where you were during each of these crises, you may have been forced to reduce retirement contributions or, in extreme cases, to invade savings and retirement accounts to survive.

That may partially explain a recent report from TD Ameritrade, which found that 43 percent of generation X said they’re behind in saving for retirement, while only 26 percent very financially secure (vs. 40 percent of baby boomers), and 37 percent gen X would like to fully retire but say they won’t be able to afford it.

Here are some goals for this is the period of your life. Aim to be free of consumer and student debt; accumulate an emergency reserve fund of six to 12 months of living expenses; and try to increase your retirement savings contribution up to 15 percent. If you are able to max out your retirement, you can then consider college education funding for your children, but it’s important to focus on yourself first.

--Baby boomers (born 1946 to 1964): By now, for most of you, the kids are out of house, and that means you can focus on retirement. Although 10,000 baby boomers retire every day, many spend more time researching and shopping for a car than planning for this milestone! Without kids to worry about, this is the time to turbocharge your savings to make up for the years when you weren’t able to save enough. It’s also a time to shift your mindset from growing your assets to protecting them and figuring out how to generate the income you need.

--The silent/greatest generations (born 1910 to 1945): You’ve done it -- you have actually retired! Even if you have ample savings, it’s important not to spend too much money early on in your retirement years. This is especially true if you retired when markets were in a downturn. Considering the increase in average life expectancy, your nest egg has to generate income for 20 years or longer. It’s also imperative not to blow up your retirement by assuming too much or too little risk. And, of course, after you turn age 70 ½, you will need to factor in required minimum distributions.