As Gen X approaches retirement age, the reality of a potential savings shortfall is causing concern. Having postponed serious retirement planning for years, this generation is now facing the consequences. Recent surveys highlight their worries, the reasons behind the situation, and the steps they are taking to improve their financial outlook.
Gen X Retirement Concerns and Contributing Factors
A significant majority of Gen Xers, exceeding 80%, are worried about not having enough money to maintain a comfortable lifestyle in retirement, according to the Schroders 2025 US Retirement Survey. On average, they anticipate retiring with approximately $711,771 saved, which is considerably less than the estimated $1.2 million they believe they will need.
Several factors contribute to this predicament. Deb Boyden, head of US defined contribution at Schroders, points out that Gen X entered the workforce during periods of economic instability, including the dot-com crash, the global financial crisis, and the pandemic-induced bear market.
This generation also served as a testing ground for employer-sponsored 401(k) plans, which were relatively new when they entered the job market. Initial 401(k) plans often lacked adequate financial education, offered limited investment options, and had low contribution limits. Features like auto-enrollment and auto-escalation were not yet common, leading to savings inertia.
Furthermore, Gen X members often carry substantial credit card and student loan debt, making retirement savings just one of many financial priorities. Data indicates that a notable portion of Gen Xers participating in workplace retirement plans have borrowed from their accounts, primarily to cover unforeseen emergencies, pay down debt, and cope with the rising cost of living.
They faced competing financial demands, including childcare, student loans, and caring for aging parents, making it challenging to prioritize retirement savings.
Taking Action and Potential Solutions
Despite these challenges, there is still time for Gen X to improve their retirement prospects. Many Gen X workers are currently in their peak earning years, allowing them to increase retirement savings through catch-up contributions and focused budgeting to identify and reduce lifestyle creep.
Contribution Strategies:
- For the coming year, workers can contribute up to $24,500 to their 401(k)s.
- Catch-up contributions allow for an additional $8,000 in savings.
- Those aged 60-63 may be eligible for super-catch-up contributions, adding up to $11,250 extra.
However, studies reveals that relatively few workers aged 45-54 contribute the maximum to their 401(k) accounts. Coupled with rising costs and inadequate savings, this situation highlights a broader retirement crisis, requiring many households to significantly boost their savings.
A study by the Nationwide Retirement Institute and The Harris Poll found that a majority of surveyed non-retired Gen Xers did not consider retirement an urgent priority until age 50 or later. As a result, many are now implementing strategies such as cutting discretionary spending and increasing retirement contributions. Some are also planning to retire later than originally anticipated, while others believe they may need to return to the workforce after retirement due to insufficient savings.
Working a few extra years, if possible, can be a valuable strategy, allowing individuals to both increase their retirement savings and delay withdrawals, enabling their investments to continue growing. After realizing retirement was nearing, many Gen Xers have taken actions to improve their financial situations:
- 40% cut discretionary spending.
- 34% increased contributions to retirement accounts.
- 23% sought out professional financial advice.
- 19% shifted their investment strategy to reduce risk.
FAQs
Why is Gen X facing a retirement savings shortfall?
Gen X experienced economic instability, limited early 401(k) plan options, and competing financial demands like debt and childcare, hindering their ability to prioritize retirement savings. Many also borrowed from their retirement accounts to cover emergencies and debt.
What steps can Gen X take now to improve their retirement savings?
Gen X can increase retirement savings through catch-up contributions to their 401(k)s, focused budgeting to reduce lifestyle creep, and maximizing contributions during their peak earning years. Those aged 60-63 may also be eligible for super-catch-up contributions.
How much do Gen Xers typically expect to retire with, and how does that compare to what they think they'll need?
On average, Gen Xers anticipate retiring with around $711,771, but they estimate needing $1.2 million for a comfortable retirement. This leaves a significant savings gap that needs to be addressed.
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