As Generation X approaches retirement, many wonder if they’ve saved enough to enjoy their golden years. From navigating economic uncertainties to balancing competing financial priorities, this generation faces a distinct set of hurdles in preparing for retirement.
That’s why we’re delving into the current state of Gen X retirement savings and giving you actionable strategies to boost your retirement preparedness. Whether you’re ahead of the curve or playing catch-up, understanding where you stand and what steps to take next can help secure a comfortable retirement future.
The Current State of Gen X Retirement Security
Recent reports paint a concerning picture of Generation X’s retirement readiness. One study by the National Institute on Retirement Security found that Gen Xers typically have just $40,000 saved for retirement. Another report by Prudential found that, among pre-retirement 55-year-olds, the median savings amounts to just $47,950.
This retirement savings gap is further highlighted by CNBC Money, which reported that the median 401(k) balance for people in their 50s is $64,700. While this figure may seem substantial, it falls drastically short of the $1.46 million that Gen Xers believe they need to retire comfortably, according to Northwestern Mutual’s 2024 Planning and Progress study.
Several factors contribute to this retirement savings shortfall. For one, Gen Xers largely began saving for retirement later than younger generations, with an average starting age of 36 compared to 27 for millennials and 20 for Gen Zers. Additionally, the shift from defined-benefit pensions to defined-contribution plans like 401(k)s left Gen X with less time to accumulate savings.
Compounding these challenges, Gen Xers are sandwiched between supporting their children and caring for aging parents while navigating multiple economic downturns and rising costs. As a result, a staggering 68% of non-retired Gen Xers surveyed by Bankrate believe they’re behind on their retirement savings goals, surpassing the percentages of both millennials (53%) and baby boomers (66%).
Retirement Savings Benchmarks for Gen X
As Gen Xers navigate their retirement readiness, it’s crucial to understand the benchmarks they should aim for at different stages of their lives. While there’s no one-size-fits-all approach to retirement planning, these milestones can serve as a guide to help ensure Gen Xers are on track to meet their retirement goals.
Age-based savings milestones
Fidelity Investments suggests that by age 40, individuals should have three times their annual salary saved for retirement. By age 50, the recommendation jumps to six times the annual salary.
These age-based savings milestones provide a clear roadmap to assess retirement preparedness and make necessary adjustments to your savings strategy.
Income-based savings goals
Another approach to setting retirement savings benchmarks is based on income levels. T. Rowe Price recommends that Gen Xers aim to save 15% of their annual income, including any employer contributions, starting in their 30s.
This income-based savings goal allows you to tailor your retirement planning to your specific financial situation, ensuring that you consistently set aside a portion of your income for the future.
Adjusting targets based on lifestyle expectations
While age-based and income-based savings milestones offer a solid foundation for retirement planning, it’s essential to adjust your targets based on their unique lifestyle expectations.
Factors such as desired retirement age, anticipated healthcare costs, and planned leisure activities can significantly impact the amount needed for a comfortable retirement. By personalizing your retirement savings goals, your retirement strategy will be more accurate and achievable and will align with your individual needs and aspirations.
As Gen X builds their retirement savings, it’s important to regularly assess one’s progress and make adjustments as needed. Consulting with a financial advisor can provide valuable insights into the specific challenges this generation faces. Our advisor matching tool can connect you with the best professional based on your goals and needs.
5 Strategies to Boost Gen X Retirement Savings
So now that we’ve covered how prepared Gen X is for retirement, here are some practical steps you can take if you feel that your retirement plan is falling short. Use these five tips to ensure that you’re taking every possible measure to secure your financial future.
1. Maximizing catch-up contributions
One effective strategy for Gen Xers to enhance their retirement savings is to take full advantage of catch-up contributions. Once you reach age 50, you can contribute an additional $7,500 to your 401(k) and $1,000 to your IRA in 2024.
These catch-up contributions provide a valuable opportunity to accelerate savings and make up for any lost ground in your long-term retirement plan. Ultimately, if you can maximize your retirement contributions, it’s usually recommended to do so.
2. Taking Advantage of Employer Matches
Another key strategy is to ensure you’re maximizing any 401(k) contribution matching schemes offered by your employer. Many companies offer to match employee retirement contributions up to a certain amount, effectively providing free money to boost your retirement savings.
Gen Xers should contribute enough to their 401(k) to take advantage of the full employer match — failing to do so is essentially leaving money on the table. After maximizing your employer match, it’s recommended to maximize contributions to tax-advantaged accounts like Roth IRAs before contributing to any other retirement savings accounts.
3. Cutting Unnecessary Expenses
To free up more funds for retirement savings, Gen Xers should take a critical look at their spending habits and identify areas where they can cut back. Reducing unnecessary expenses and redirecting that money toward retirement accounts can significantly improve your retirement outlook.
Traveling less frequently or downsizing your car or home can be effective ways to save money. Even small changes, like cutting out daily coffee shop visits or dining out less frequently, can add up to substantial savings over time.
4. Optimizing investment allocations
As Gen Xers approach retirement, it’s crucial to ensure that their investment portfolio is properly allocated to balance growth and risk. This may involve adjusting the mix of stocks, bonds, and other assets to align with your retirement timeline and risk tolerance.
While there are many tried and tested frameworks for building a balanced portfolio, these may not be tailored to your specific needs and retirement goals. Consulting with a financial advisor to develop a bespoke investment strategy can maximize your retirement savings potential while managing risk.
5. Exploring additional income streams
Finally, Gen Xers can boost their retirement savings by exploring additional income streams. This might include taking on a side hustle, starting a small business, or investing in rental properties.
By diversifying your income sources, you can accelerate your retirement savings and build a more robust financial foundation for your golden years. However, it’s important to carefully consider the time and financial commitments involved before pursuing any new ventures.
The Importance of Consulting a Financial Advisor
Navigating the complexities of retirement planning can be overwhelming for Gen Xers, especially given their unique challenges and concerns. This is where consulting a financial advisor can make a significant difference in achieving retirement readiness and developing a comprehensive strategy tailored to their specific needs.
A financial advisor can provide personalized retirement planning that takes into account factors such as current savings, retirement age expectations, and desired lifestyle in retirement. They can help Gen Xers assess their retirement preparedness and identify areas where they may need to make adjustments to stay on track toward their retirement goals.
Moreover, a financial advisor can address the unique challenges faced by Gen X, such as balancing the financial responsibilities of supporting both children and aging parents. In fact, more non-retired Gen Xers lack confidence in their retirement savings compared to their Millennial, Baby Boomer, and Gen Z counterparts.
Consulting a financial advisor is also crucial for developing a long-term financial strategy that extends beyond retirement. Match with an advisor who can provide expert guidance on estate planning, wealth transfer, and creating a lasting legacy for future generations. By taking our quiz and matching with an advisor, Gen Xers can gain peace of mind knowing that they have a comprehensive plan in place to help secure their financial future and that of their loved ones.
Be Prepared and Retire Comfortably
Generation X faces unique challenges in preparing for retirement, but there are effective strategies to boost savings and secure a comfortable future. Maximize catch-up contributions, take full advantage of employer matches, cut unnecessary expenses, optimize investment allocations, and explore additional income streams to ensure you’ve saved up enough to retire before it’s too late.
To take the next step towards securing your financial future, consider finding a financial advisor who can help create a tailored retirement plan. By taking action now and leveraging expert advice, you can ensure peace of mind for the years ahead. These steps, combined with regular assessments of retirement goals and progress, can help bridge the gap between current savings and desired retirement targets.
FAQs
How much money do members of Generation X need to retire comfortably?
American adults estimate they will need $1.46 million to retire comfortably but most only have around $93,000 saved, leaving a frightening shortfall of nearly $1.37 million to stress over.
What is the typical 401(k) savings balance for Generation X?
The average 401(k) balance for people in their 50s is $214,100.
What proportion of Generation X has a pension plan?
While an exact statistic isn’t provided, Morningstar estimates that approximately 79% of Generation X don’t have access to a defined benefit pension, while 48% lack access to a defined contribution (DC) plan like a 401(k).
What is the average net worth of a Generation X individual?
The average net worth of a Generation X individual is estimated to fall between $500,000 and $1,000,000, depending on the source and age group. According to a 2024 USA Today report, the average net worth is $557,900, though it drops to $374,000 if you exclude home equity. Median net worth figures, typically lower, range between $200,000 and $400,000.