5 Top Investment Strategies for Gen X as Retirement Approaches

Whether your ideal retirement involves spending more time with your grandkids, traveling the world, or investing in hobbies you love, many in Gen X are standing on the verge of a major life change. That makes now the time to get serious about planning for retirement. A solid financial plan is advantageous as you enter retirement but we believe your investments are the fuel for that plan. While you may have been investing for years, reviewing your investment strategies can help you be more assured your ideal retirement can come to fruition. From diversifying your portfolio to managing taxes efficiently, here are five top investment strategies that can help you build a retirement plan that balances growth, income, and security.

1. Diversifying Your Portfolio

We believe one of the most fundamental investment strategies is diversification, and it remains a critical approach as you near retirement. By spreading your investments across different asset classes you can manage risk while still pursuing growth.

Advantages:  

Diversification helps protect your portfolio from volatility. Different asset classes tend to react differently to market conditions, so when one asset is underperforming, others may perform better. This reduces the impact of market downturns on your portfolio and offers a balance between growth and stability. If you’re approaching retirement, you might find that balance is key to preserving the gains you've made over the years while still offering opportunities for growth.

Who Should Consider It:  

At Wealthquest, we believe everyone benefits from diversification, but it becomes especially important as retirement nears. If you’re in Gen X and are heavily concentrated in one type of investment, like high-growth stocks, it may be time to diversify to reduce risk. This strategy is ideal for those who want to ensure steady growth while protecting their portfolio from unexpected market swings.

2. Maximizing Retirement Contributions

As you enter your 50s, you have a unique opportunity to catch up on your retirement savings. Retirement accounts like 401(k)s and IRAs allow those over 50 to contribute additional funds through catch-up contributions, giving you a valuable way to boost your nest egg in these final working years. In 2024, the catch-up contribution limit for 401(k)s is $7,500, while for IRAs, it's $1,000.

Advantages:  

Maximizing your retirement contributions allows you to take full advantage of the tax benefits these accounts offer. Contributions to traditional IRAs and 401(k)s are often tax-deferred, meaning you don’t pay taxes on them until you withdraw the funds in retirement. This can help lower your taxable income now and give your savings more time to grow. In addition, contributing the maximum amount helps ensure you’re prepared for the longer retirement periods that many Gen Xers will experience.

Who Should Consider It:  

Anyone approaching retirement who hasn’t yet reached their savings goals should consider maximizing their contributions. This strategy is particularly useful for Gen X investors who may have had gaps in their savings journey, due to circumstances like career changes or family obligations. Catch-up contributions provide an opportunity to close those gaps quickly and efficiently.

3. Balancing Growth and Stability as Retirement Approaches

As retirement nears, many investors may feel inclined to shift their focus entirely from growth to income generation. At Wealthquest, we believe in maintaining a balanced approach that continues to prioritize growth while managing risk. By staying invested across diverse asset classes—including U.S. and international stocks, bonds, and select alternatives—your portfolio can achieve stable growth through varying market conditions, supporting both immediate needs and long-term financial goals.

Advantages:

A balanced portfolio that includes a mix of equities, bonds, and other assets can help manage volatility while providing steady growth opportunities. Maintaining growth-oriented investments, even as you approach retirement, helps to allow your portfolio to keep pace with inflation and assists in ensuring you don’t outlive your savings. Meanwhile, including stable assets like bonds within the portfolio adds a layer of protection and income without sacrificing potential growth.

Who Should Consider It:

This strategy is ideal for Gen Xers who want to achieve stable, long-term growth rather than shifting exclusively to income-focused assets. Those who want a resilient retirement strategy that balances growth and stability can benefit from a diversified portfolio designed to meet financial goals across all market conditions.

4. Roth Conversions

Roth conversions can be a powerful tool to help minimize taxes in retirement, but they’re often most beneficial after retirement when your income—and therefore your tax rate—has likely decreased. By converting funds from a traditional IRA or 401(k) into a Roth IRA during lower-income years, you can build a bucket of tax-free dollars that can be withdrawn in retirement to help manage your taxable income.

Advantages:

Roth IRAs grow tax-free, and qualified withdrawals remain tax-free, providing significant flexibility in retirement. Since Roth IRAs also have no required minimum distributions (RMDs), your investments can continue growing if you don’t need to access the funds immediately. This can be particularly advantageous if you’re aiming to maximize the longevity of your retirement savings. Waiting until retirement, when income is typically lower, can make Roth conversions a tax-efficient option, allowing you to strategically manage taxable income over time.

Who Should Consider It:

This strategy can be beneficial for retirees who want to diversify their tax exposure in retirement, minimize the tax burden on heirs, or extend the growth potential of their investments by converting at a lower tax rate. Consulting with a financial advisor can help determine if Roth conversions align with your overall tax and retirement strategy.

5. Tax-Efficient Withdrawal Strategies

Finally, developing a tax-efficient withdrawal strategy can help ensure your savings last through retirement. By strategically timing when and how you withdraw from various accounts—taxable, tax-deferred, and Roth—you can reduce your overall tax burden.

Advantages:  

A tax-efficient withdrawal strategy allows you to manage your tax liability while ensuring that your savings stretch further. For example, by withdrawing from taxable accounts first, followed by tax-deferred accounts (such as 401(k)s and IRAs), you can reduce the amount of taxable income you report each year. And if you have tax-free Roth assets that can be withdrawn, it gives you even more flexibility to manage your income year-to-year. This strategy helps you avoid higher tax brackets and potential Medicare premium surcharges (IRMAA).

Who Should Consider It:  

This strategy is particularly useful for Gen Xers with multiple types of retirement accounts. If you’ve been diligent about saving in both tax-deferred and tax-free accounts, like Roth IRAs, it’s important to plan how you’ll draw down those funds to maximize their benefits. Anyone looking to minimize taxes in retirement should work with a financial advisor to develop a withdrawal strategy that aligns with their income needs and tax goals.

Crafting a Retirement Plan That Works for You

If you’re a member of Gen X, your retirement may be quickly approaching, but with the right strategies in place, you can have more confidence your financial future is secure. Whether you’re focusing on diversifying your portfolio, maximizing retirement contributions, or fine-tuning your withdrawal strategy, it’s important to take action now to ensure a smooth transition into retirement. 

At Wealthquest, our “all under one roof” approach brings together investment management, tax planning, and retirement strategies tailored to your specific needs. Schedule time with us today to see how we can help you create a personalized plan that prepares you for the next chapter.