CPA Practice Advisor - 19

A YEAR IN THE LIFE: PAYROLL ACCOUNTANT

6

Retirement Tips for
Generation X by Mark Thomas

GENERATION X, BORN from 1965 to 1980
(ages 39-54), between the Baby Boomers
and Millennials, is often referred to as
"America's neglected middle child."

Just as Gen X was getting started on their careers, enjoying home ownership and beginning to save for retirement,
they were hit by the financial crisis of 2008. While their
housing values and incomes have recovered, they have the
highest average debt of any generation, $134,323 (national
average, $93,446).
Consider these statistics concerning Gen X:
■ 34% have zero retirement savings
■ 29% expect to live off their Social Security benefits
■ 26% have more than $10,000 credit card debt
■ Their median retirement savings is $69,000
How much would a 40-year old CPA with $69,000 in their
401(k) need to put away to retire? With 20 years' experience,
it's not unreasonable to expect them to be earning $100,000
a year. If they put 16% of their income annually into their
401(k), with an average rate of return of 7%, at age 65 it
would be worth $1.42 million. If their employer contributes
to the plan, it will be worth over $1.62 million.
Will it be enough to retire comfortably 25 years from
now in 2044? Recent articles suggest that you need to save
16.4 times your final salary for retirement. Which puts into
question our example above. Setting aside 16% of your salary is a lofty goal. Is it enough?

WHAT CAN GEN XERS DO TO ENSURE A
COMFORTABLE RETIREMENT?
Unless you work for the government there just aren't many
pensions anymore so your retirement is built on two things:
Your savings and Social Security.

GET RID OF YOUR DEBT:
To get the most out of your 401(k), take care of your debt
first. You can't retire with a lot of debt and you're not going
to have the income to sustain it. The number one tool you
can use to manage debt is a budget.

CREATE A BUDGET:
There are some great apps available, like Mint, that can
help put a budget together. The key is to track where you're
spending your disposable income for six months. You buy
coffee at Starbucks every day, $150 on concert tickets, $100
on jeans...
You may be surprised to learn where your money is
going. Your budget app can help show you where you need

to make sacrifices. A simple change in your spending habits
can help you to pay down your debts. As soon as you get the
debt out of your budget it frees up money that you should
be saving.

MAX OUT YOUR 401(K):
You want to take advantage of the compounding of tax
deferred growth the 401(k) provides. Put as much into that
as you possibly can. If you're under age 50, the max you can
put in in 2019 is $19,000.
■ The $19,000 limit does not include employer contributions.
■ There is a $56,000 annual limit on combined employee and
employer contributions.
■ If you are 50 or older you can kick in an extra $6,000 catch-up
contribution for a total of $25,000.
If you can max out your 401(k), that's the best thing
you can do to get on track. For most people that's going to
require substantial budgeting and sacrifice to get there.
Hopefully, your spouse can do the same.

REVIEW YOUR SOCIAL SECURITY BENEFITS:
Visit the Social Security administration website (ssa.gov)
and get your statement. Then you can begin to plan at what
age you want to retire.
The longer you defer Social Security the more money
you'll get. It makes a big difference. If you start taking
money at 62 you're going to receive a substantially reduced
monthly income.

EXPLORE ONLINE FINANCIAL TOOLS:
Most financial institutions and large companies have
an online retirement center where you can enter your
information and it'll project your 401(k)'s growth. If you
have 15 years more to work, it'll show you how much retirement savings you're going to accumulate, plus your Social
Security payment. It'll start to give you some comfort that
you're on target.

CREATE FINANCIAL OBJECTIVES:
As a CPA, you might be financially savvy, but if debts are
causing you anxiety and you don't know what to do about it,
create a budget and stick to it. Many people have difficulty
because they don't know how they're spending their money.
Understanding your finances, having a budget, having
financial objectives-that's how you create a stress-free
financial life. ■
Mark Thomas, CLU, ChFC, is senior vice president of Aon Insurance Services http://www.cpai.com.

NOVEMBER 2019 ■

www.CPAPracticeAdvisor.com

19


http://adp.com/accountant http://www.ssa.gov http://www.cpai.com http://www.CPAPracticeAdvisor.com

CPA Practice Advisor

Table of Contents for the Digital Edition of CPA Practice Advisor

From the Editor: The Land of the Free
How to Get Started with Client Accounting Services
Crafting a Strategic CAS Plan
From the Trenches: Do Your Best Tax
2019 Product Review: Sales & Use Tax Systems
Marketing Your Firm: Marketing to the Home Care Nursing Industry
Marketing Your Firm: Your Bedside Manner: 3 Steps to Improve Client Trust
2019 Product Review: Hosting Service Providers
A Year in the Life of a Payroll Accountant: The Pros & Cons of Temp vs. Seasonal Workers
A Year in the Life of a Payroll Accountant: 6 Retirement Tips for Generation X
The ProAdvisor Spotlight: Newest Features in QuickBooks Online Advanced Speed Workflow
Guest Column: 7 Productivity Hacks for the Strategic CFO
The Staffing & HR Advisor: You May Be Overlooking Top Performers When Hiring
The Millennial Advisor: The Problem with Price
The Leadership Advisor: The Change We Can Control
AICPA News
Bridging the Gap: 3 Small Steps Toward Transformation
Special Feature: The Unseen Talent Pool
CPA Practice Advisor - 1
CPA Practice Advisor - 2
CPA Practice Advisor - 3
CPA Practice Advisor - From the Editor: The Land of the Free
CPA Practice Advisor - How to Get Started with Client Accounting Services
CPA Practice Advisor - Crafting a Strategic CAS Plan
CPA Practice Advisor - 7
CPA Practice Advisor - From the Trenches: Do Your Best Tax
CPA Practice Advisor - 9
CPA Practice Advisor - 2019 Product Review: Sales & Use Tax Systems
CPA Practice Advisor - 11
CPA Practice Advisor - 12
CPA Practice Advisor - 13
CPA Practice Advisor - Marketing Your Firm: Marketing to the Home Care Nursing Industry
CPA Practice Advisor - Marketing Your Firm: Your Bedside Manner: 3 Steps to Improve Client Trust
CPA Practice Advisor - 2019 Product Review: Hosting Service Providers
CPA Practice Advisor - 17
CPA Practice Advisor - A Year in the Life of a Payroll Accountant: The Pros & Cons of Temp vs. Seasonal Workers
CPA Practice Advisor - A Year in the Life of a Payroll Accountant: 6 Retirement Tips for Generation X
CPA Practice Advisor - The ProAdvisor Spotlight: Newest Features in QuickBooks Online Advanced Speed Workflow
CPA Practice Advisor - Guest Column: 7 Productivity Hacks for the Strategic CFO
CPA Practice Advisor - The Staffing & HR Advisor: You May Be Overlooking Top Performers When Hiring
CPA Practice Advisor - The Millennial Advisor: The Problem with Price
CPA Practice Advisor - The Leadership Advisor: The Change We Can Control
CPA Practice Advisor - AICPA News
CPA Practice Advisor - Bridging the Gap: 3 Small Steps Toward Transformation
CPA Practice Advisor - Special Feature: The Unseen Talent Pool
CPA Practice Advisor - 28
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