Gen X investors are now at an age where the need to accumulate wealth in retirement plans is getting closer to overlapping with the in-retirement phase of needing to draw on stable investment income. Many Gen Xers remain underfunded, and a longer runway to retirement may be needed, but it opens up the risk of being caught in an ill-timed market crash:
Gen X, roughly defined as those born between 1965 and 1980, has been heavily impacted by the shift from defined benefit to defined contribution pensions, as workplace pensions became less common. Only 14% of Gen X workers have a traditional pension, compared with 56% of boomers, according to research from Alliance's Retirement Income Institute:
The situation can leave a Gen Xer to watch their retirement fund warily. A decade of strong returns has placed many investors, particularly those a few years out from retiring, heavily weighted in S&P 500 mutual funds and ETFs:
History is littered with instances of crashes that, for the unlucky, happen at the worst possible moment. The value of Amazon shares took roughly a decade to recover after reaching its peak in 1999:
How to gradually move away from S&P 500
For starters, investors who are already thinking about retirement should avoid being starstruck by the S&P 500's gains. Financial advisors recommend steering retirees toward a diversified "war chest" to protect their investments:
