Gen X is facing a critical juncture as retirement looms, prompting a scramble to address significant retirement savings shortfalls. After decades of delayed action, the reality of inadequate savings is hitting hard, especially as the first members of this generation approach 60. New studies shed light on the anxieties, causes, and corrective measures being taken by Gen X.
The Growing Anxiety Surrounding Gen X Retirement Savings
Over 80% of Gen Xers express concern about not having enough money for a comfortable retirement, a sentiment highlighted in the Schroders 2025 US Retirement Survey. On average, this generation anticipates retiring with approximately $711,771, falling short of the estimated $1.2 million deemed necessary.
Several factors have contributed to this situation. Many Gen X individuals entered the workforce just before the dot-com crash and subsequently navigated the global financial crisis and the pandemic-induced 2020 bear market.
Furthermore, Gen X served as the testing ground for employer-provided 401(k) plans, which initially lacked comprehensive financial education, offered limited investment options, and restricted contribution amounts. Features designed to boost savings, such as auto-enrollment and auto-escalation, were not yet standard.
Factors Contributing to the Savings Gap
The issue of Gen X retirement savings is compounded by high levels of credit card and student loan debt, making retirement saving just one of many competing financial priorities.
Data indicates that nearly a quarter of Gen Xers participating in workplace retirement plans have borrowed from their accounts, surpassing the rates of both millennials and baby boomers. These withdrawals were primarily used to cover unforeseen family or personal emergencies, pay down debt, and manage the rising cost of living.
Gen X has been repeatedly encouraged to save for retirement, but this advice wasn’t always easy to follow amid an array of competing priorities, which ranged from childcare to student loans and caring for aging parents.
Strategies to Bridge the Retirement Savings Gap
Despite the challenges, there is still time for Gen X to improve their retirement savings gap. Many Gen X workers are currently in their peak earning years, affording them the opportunity to significantly boost their retirement savings through catch-up contributions and a focused approach to budgeting.
This involves carefully examining spending habits to identify areas where expenses can be reduced, freeing up additional funds for retirement contributions.
Next year, workers can contribute up to $24,500 to their 401(k)s, with catch-up contributions adding an extra $8,000, and those aged 60 to 63 eligible for super-catch-up contributions of up to $11,250.
The Urgency of Late Retirement Savings for Gen X
A study by the Nationwide Retirement Institute and The Harris Poll revealed that a majority of non-retired Gen Xers did not consider retirement an urgent priority until age 50 or later. Now, many are cutting discretionary spending and increasing their retirement contributions. Approximately 15% plan to postpone retirement, and 26% anticipate needing to return to work within a year of retiring due to insufficient savings.
Working a few extra years can be a beneficial strategy, allowing individuals to both increase their retirement savings and delay withdrawals, enabling their accounts to continue growing.
After realizing retirement was nearing, 4 in 10 Gen Xers surveyed said they cut discretionary spending, 34% increased their contributions to retirement accounts, 23% sought out professional financial advice, and 19% shifted their investment strategy to reduce risk.
Addressing the Gen X Retirement Crisis
Fewer than one in six US workers aged 45 to 54 contribute the maximum to their 401(k) accounts. This, coupled with rising costs, inadequate savings, and the looming depletion of the Social Security trust fund, underscores a Gen X retirement crisis in the US, requiring many households to boost their savings to achieve stable and sufficient income in retirement.
FAQs
Why is Gen X facing a retirement savings gap as they approach retirement?
Several factors contribute to the Gen X retirement savings gap, including entering the workforce during economic downturns, the initial limitations of 401(k) plans, and competing financial priorities like debt and childcare. Many Gen Xers also didn't consider late retirement savings a priority until recently.
What can Gen X do to improve their retirement savings gap now?
Gen X workers are in their peak earning years and can significantly boost their retirement savings. They can focus on budgeting, reduce expenses, and take advantage of catch-up contributions to their 401(k)s.
How much can Gen X contribute to their 401(k) to catch up on retirement savings?
Next year, workers can contribute up to $24,500 to their 401(k)s, with catch-up contributions adding an extra $8,000, and those aged 60 to 63 eligible for super-catch-up contributions of up to $11,250.
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