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My, how time flies! It seems like it was just yesterday when little GenXers were watching Saturday morning cartoons on their black and white televisions.
Now, the first in the generation are beginning to turn the big 5-0. While it is fun to look back fondly on the 70s and 80s, it is important to look ahead and ensure the GenXers are financially prepared to enter their retirement. Let’s take a look at Lisa’s journey – through her career and multiple 401(k)s.
Lisa graduated from college in 1988, and immediately entered the workforce. After a few years, she got married then had her first child two years later. Lisa stopped working to focus on raising her family. Distracted by babies and “life,” her 401(k) continued earning quarterly dividends, but was ignored.
Lisa returned to the workforce six years later when her two children were in school. She participated in her new employer’s 401(k), but now juggling a new job, kid’s homework, and other family activities, Lisa never got around to rolling over her first 401(k).
After a couple of years, Lisa’s family decided to move closer to her husband’s aging parents. Once the kids settled into their new school, Lisa found a job. She participated with this employer’s 401(k), but never attended to the other two.
Today, Lisa is 49. Her children are in college. She has started thinking about retirement, once seemingly far off and a low priority. Lisa realizes now is the time she should get her financial ducks in a row.
While it is ideal to begin your retirement planning in your 20s, many GenXers will find themselves in a similar situation, not having planned for enough in advance for their retirement as many of the Millennials have done.
Lisa was smart to turn her attention to retirement as she approached 50; it is a key milestone for financial planning. She can catch-up on her 401(k) contributions because the maximum contribution to 401(k)s increases by $6,000 upon turning fifty. Lisa can also catch-up even more by contributing up to $1,000 in a traditional or Roth IRA.
Lisa should also consider rolling her first two into the one with her current employer. Alternatively, she could roll her first two 401(k)s into an IRA. For the best investment strategies, Lisa and her husband decide to meet with a wealth manager who advises them on the best investment strategy based on their personal needs, retirement plans, and level of comfort with risk. With a good investment strategy, their 401(k)s and other savings can make great gains over the coming years until they reach the age when they can draw on their retirement funds without penalty.
Example is hypothetical for illustrative purposes, and is not representative of any client or investor experience. Individual results will vary. No strategy assures success or protects against loss.
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Investments made with Freedom First Wealth Management are not NCUA insured, nor are they guaranteed and could lose value.
Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. Investment Advice offered through Level Four Advisory Services, a registered investment advisor. Level Four Advisory Services, Freedom First Credit Union, Freedom First Wealth Management are separate entities from LPL Financial.