According to a 2016 survey by the Transamerica Center for Retirement Studies, those in Generation X currently have an average household retirement savings of just $69,000.
Of course, this data could be concerning: How will this generation effectively move toward a comfortable retirement? Additionally, multiple financial risks can further reduce their retirement options, so it’s important for middle-aged Americans to be aware of them.
Six members of Forbes Finance Council shared some of the biggest financial risks middle-aged adults face — from changing careers to overspending and even getting a divorce — and what they can do to overcome or avoid them.
1. Changing Careers
A career change at middle age can be scary and may mean paying for additional schooling, training or certifications. It may also mean taking a salary cut as you enter a new industry. Affording this change can be daunting, as there may be fixed overhead expenses that need to be maintained. Research the career paths available and expected salary growth in the new industry before making the leap. – Jeff Pitta, Senior Market Advisors
The biggest risk I see is overspending. Many times people in this phase of life may be buying big fancy houses and cars they honestly cannot afford, which can affect their saving rates and their ability to build wealth in the long term. During this time, I believe their focus should be on saving 15–20% of their income for retirement and creating wealth-building strategies to meet their long-term goals. – Justin Goodbread, Heritage Investors
3. Lifestyle Creep
When adults get to middle age, their families and lifestyles often seem to grow quickly. With increasing paychecks often come increasing costs and current demands for money. As you start to make more money, beware of “lifestyle creep.” Before you buy a better vacation, home or fancy new car, do some projections to see if you are on track for your other goals and objectives, like college planning or retirement. – Scott Bishop, STA Wealth Management
4. Tighter Lending Standards
It can be hard to get a 30-year mortgage past age 40. Many lenders now consider not just a borrower’s current income, but his or her projected income throughout the life of the loan, which tends to drop significantly post-retirement. To avoid being turned down, middle-aged consumers can improve their income outlook by paying down debts and building up retirement savings. – Kyle Kamrooz, Cloudvirga
Divorce later in life can be devastating to finances. U.S. adults 50 and over are divorcing at twice the rate they did 25 years ago, according to data from Pew Research. With less time to recover financially, I believe people in their 50s must take steps to downsize, minimize debt and bolster savings. That often means working longer than originally planned — perhaps another three to five years — and spending less throughout retirement. – Richard Rosso, Clarity Financial LLC
6. Lack Of A Backup Plan
For some, middle age can be their highest earning period, but it can be very difficult to substitute that income in the case of job loss. I have witnessed a few high earners get downsized and subsequently find it very difficult to get a comparable job. Job security is not 100% certain, and you should have a backup plan in case you find yourself in the market for a job once again. – Vlad Rusz, Vlad Corp. USA
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