I'm a Financial Planner: 5 Tax Planning Tips I Always Share With My Gen X Clients
Gen X is in a unique position right now. Their peak earning years overlap with college tuition bills, aging parents who may need support and a retirement countdown that's suddenly closer than it ever was.
That combination makes tax planning more valuable for this generation than almost any other since the decisions made now shape both this year's bill and long-term flexibility down the road, said Jim Lapinska, CEO of Axiom Wealth Management, an office of Northwestern Mutual.
Take the First Step: I'm a Financial Expert: 4 Gen Z Money Habits That Help Build Lasting Wealth
Sign Up Today: Start Growing Your Net Worth With Smarter Tracking
1. Max Out Catch-Up Contributions
Turning 50 years old unlocks the ability to contribute more to a workplace retirement plan than younger coworkers can and Lapinska said this is a big deal.
"For Gen Xers in their highest-earning years, these contributions can accelerate retirement savings while potentially reducing current taxable income," he said. "I encourage clients to revisit their contribution rate after every raise, bonus or major expense that rolls off."
2. Balance Traditional and Roth Contributions With the Long View
The traditional-versus-Roth debate isn't about which one wins outright. Lapinska said it's a tax-timing decision that depends on where someone stands now and where they expect to land later.
"A traditional contribution may provide a tax benefit today, while a Roth contribution can create tax-free income in retirement," he said. "The right balance depends on your current income, anticipated retirement tax bracket and existing account mix."
His goal with clients is building real diversification across account types.
"I help clients build tax diversification, so they are not relying entirely on one type of account later."
3. Treat an HSA as a Retirement Tool, Not Just a Medical Wallet
Most people use a health savings account (HSA) the way they'd use a checking account earmarked for doctor visits. Lapinska pushes his Gen X clients to think bigger.
"HSAs offer tax-deductible contributions, tax-deferred growth and tax-free withdrawals for qualified medical costs," he said.
For clients who can cover current medical expenses out of regular cash flow, he suggested investing a portion of the HSA balance instead of leaving it in cash, letting it grow for healthcare costs later in retirement, when those costs tend to be highest.
4. Coordinate College Funding With the Bigger Financial Picture
Paying tuition while also trying to hit peak retirement savings years can be difficult and Lapinska said the biggest mistake here is treating a 529 withdrawal or an investment sale as a standalone decision.
"Before withdrawing from a 529 plan or selling investments, review which expenses qualify, whether education tax benefits may be available and how the transaction could affect your overall tax picture," he said.
His broader point cuts to the heart of the trade-off Gen X parents face.
"There are several ways to finance an education, but fewer ways to fund retirement."
5. Review Gains, Losses and Giving Before Year-End
Lapinska recommended a year-end review that looks at everything together rather than each piece in isolation.
"Tax-loss harvesting may help offset realized gains, while grouping multiple years of charitable gifts into one year or using a donor-advised fund may make giving more tax-efficient," he said.
The key, he said, is evaluating these moves as a set: "These strategies should be evaluated together so one decision does not create an unintended consequence elsewhere."
Bonus Advice: The Mistake That Undermines Everything Else
Lapinska's biggest concern isn't any single missed deduction; instead, it's timing.
"The biggest mistake I see is treating tax planning as something that happens only when it is time to file a return," he said. "By then, many of the most useful planning opportunities have passed."
His recommendation is to meet with a financial advisor and tax professional before year-end and again after any major shift in income, employment or family circumstances, while there's still time to actually act on what comes up.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: