Gen X is about to face the biggest Social Security decision - and a lot of money is on the line

By Beth Pinsker

A new book, 'Retirement Bites,' aims to school this age group about the decisions that lie ahead

Where did the years go?

The angsty originators of the quarter-life crisis start to hit 60 this year, and that means some big decisions are ahead for Generation X. The most consequential: when to take Social Security.

"Social Security is one of the greatest pieces of your retirement plan," said Kerry Hannon, co-author of the new book "Retirement Bites: A Gen X Guide to Securing Your Financial Future," which aims to prepare a whole new group of Americans for what's coming next. Often almost forgotten between the much larger baby boomer and millennial generations, Generation X typically refers to those born between 1965 and 1980 - which means the oldest among them are turning 60 this year.

Hannon and co-author Janna Herron were working together at Yahoo Finance and noticed that Gen X topics kept coming up. They decided the generation needed a primer on how to get ready for retirement.

"Reports were flying off one after another. All of them said Gen X was woefully unprepared for retirement, and even if they were prepared, they didn't think they were," said Hannon. "Every time I wrote about one of these studies, there would be a lot of comments."

"Retirement Bites" doesn't necessarily break new ground when it comes to planning strategies - it's all about saving smartly while working, making good choices about when to stop and spending wisely once you do. But it does take into consideration the particular challenges that Gen X has faced, the most important being the dismantling of the pension system in America. Most of this age group has had to go it alone, saving in 401(k) plans from their earliest working days, but without the benefit of advances like auto-enrollment, auto-escalation and Roth 401(k)s.

Gen X is also reaching retirement age at a time of potentially strong economic headwinds. Besides high inflation, stock-market volatility and job instability, there's also the threat that Social Security will become insolvent by 2033 or 2034, that Medicare will face cuts and that other social safety nets like Medicaid could be decimated. Still, Hannon thinks that those scenarios will not come to pass, and that politicians will eventually fix these issues. "Every single person I talk to in this field gives me this message of optimism that something will click in," she said.

Whatever happens, the decision about when to claim Social Security is a crucial one. In an interview with MarketWatch, Hannon went through three key points that Gen Xers need to consider as they approach age 62.

1. How is your health? How long do you expect to live?

The decision about when to take Social Security involves an algebra problem, with the unknown factor being when you will die. No one knows when that will happen, of course, but everyone can honestly assess their health at 60. The ages for claiming benefits go from 62 to 70, with different benefit amounts at every point in between. Someone who claims at age 62 will get the lowest possible payout - permanently. For Generation X, full retirement age is 67, and there is a bonus for every month that claiming is delayed, up to age 70.

"The standard advice from a lot of us is that if you can hold off until age 70, you'll get the biggest bang for the rest of your life. You get a roughly 8% increase each year from your full retirement age," Hannon said.

If you have longevity in your family and are in good physical health, you might want those increased payments, because they continue for the rest of your life, adjusting for inflation yearly. But if you have health issues or you really need the money sooner, Hannon said, "this becomes something you need to think carefully about. You can start at age 62."

Hannon suggested that people log in to their personal account on the Social Security website and look at the chart that compares payments at different ages of claiming. "That's quite eye-opening," she said. "Your monthly check can be almost double if you wait."

2. What other financial sources do you have?

While some 27% of retirees end up relying solely on Social Security benefits for income in retirement, that's not the goal of most people. Hannon wants Gen Xers to think about their total income and debt picture before they make the decision about when to claim Social Security.

There is often a time between the ages of 60 and 65 when people want to - or have to - stop working. They face a gap in income between that point and when they sign up for Medicare at 65 and when they claim Social Security. If the choice is between spending down what might be meager retirement savings and taking Social Security early, then it might be most advantageous to take it early.

Hannon also said debt figures heavily into the Gen X picture. "If you have some serious debt built up from student loans, which many Gen Xers do, or you are amped up with credit-card debt, you have to take a look at that," she said. It might be beneficial to claim early in a case like that, because it can help you take care of that debt and better handle your cost of living.

3. How will you spend your days in retirement?

Hannon is an expert in second acts. Her previous books focused on working past age 50 ("In Control at 50+") and having an encore career ("Great Pajama Jobs"), so she's a big advocate of considering working in some capacity as part of a retirement plan.

"Do that soul-searching at 60 of what 65 might look like," Hannon said. "These are years you can't keep kicking it down the road. Think about your budget, what retirement accounts you have and if you can consolidate things. Are the kids launched? Are you caregiving for an aging relative? It's like a jigsaw puzzle."

If you can work, think about what you want to do, she suggested. Nothing is out of the realm of possibility, even if you think it's too late for you to start over. "You have to be adding skills and paying attention. Things are moving too quickly these days not to," she said. "The labor market is tricky right now. It's difficult to get back in if you get out."

Hannon's message to Gen X members on the glide path toward retirement is succinct: Do what you want to do. "Live your life," she said. "You worked for it. You earned it."

Got a question about investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write to me at beth.pinsker@marketwatch.com. Please put "Fix My Portfolio" in the subject line.

You can also join the Retirement conversation in our Facebook community: Retire Better with MarketWatch.

By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

More Fix My Portfolio

-- Would you delay retirement so your kids can have health insurance until they're 26?

-- The case against Roth conversions: Most early retirees won't benefit from paying tax now

-- IRS rules now say 401(k) catch-ups for high earners have to be in a Roth. Is it still worth it?

-Beth Pinsker

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-06-25 1635ET