A Note to GenXers

     I just read a chart that identifies the generational differences between GenX, Millennials and Baby Boomers. It stated that the GenX generation is the first generation in US history to be less well-off than their parents. I have written about the reasons for this in past posts, but it doesn't have to be this way. I agree that the work environment is more difficult now that it was 25 years ago, but a little education about finance and proper preparation for the future can mitigate the changing climate. First, about saving for retirement, there are many retirement plans available to workers: 401k, IRA, SEP, HSA, and so on. A google search will reveal all of them. HSA's also can be used like a IRA, you just have to read the rules in an IRS publication like Pub 17. At age 65, (almost) I have a few things to share with the younger generation about retirement: Take advantage of the matching funds that your employer offers you, its free money. Don't fall for the regular (weekly) investments in your company's stock,( I lost my ass in this one). Have an investment or savings program outside of a Qualified Retirement plan. Money saved or invested outside of any retirement plan has already been taxed and does not produce a tax liability during retirement. Only the earnings on these funds are taxed, remember that dividends are taxed at a lower rate than other income. Any redemptions or distributions from a retirement plan are taxed as ordinary income. By owning after tax assets, you can avoid the 1099R that comes from any distributions from retirement accounts. Just like Millennials hate to pay taxes while working, they will really hate the tax burden in retirement. Most of the retirees that I worked with in the past still do not need the money in their 401k's at age 80 because they have other funds to live on. At age 70.5, retirees are required to start taking funds out of retirement accounts, this is callled a RMD (required minimum distribution) and is taxed at ordinary income rates. Many seniors resent this requirement because they don't need the money and don't want the tax burden. The funds in the retirement accounts are used as a safety net in old age. I don't know what will happen to social security or medicare in the future, but that is why saving in a retirement account can produce peace of mind. Bottom line, millennials will only be less well off than their parents if they don't prepare for the future. Not all Boomers are enjoying a comfortable retirement either, just the people who planned for the future can live out their lives on their savings.