An additional challenge is that Gen Xers will start reaching their full Social Security retirement age of 67 in 2032, just a year before the Social Security trust fund is expected to run out. At that time, it’s projected that the program may be able to pay just 77% of scheduled benefits, unless Congress finds a solution in the meantime This may sound bleak, but there’s still time to get back on track. Here are some ideas to consider, not only for Gen Xers but for anyone concerned about falling short of retirement savings goals.
Calculate retirement needs. Only 12% of Gen X workers have used a calculator or worksheet to estimate the savings they will need for a comfortable retirement. Regardless of age, workers who try to calculate their retirement needs tend to have higher savings goals and are more confident about reaching those goals.
Make saving a priority. Gen Xers have many competing financial priorities — mortgages, auto loans, college for their children, and sometimes their own student loans. If that sounds familiar, you might have to reduce expenditures in order to allocate more to savings. When your children are out of school or your auto loan is paid off, you can dedicate additional resources to saving for retirement.
Increase contributions. Even though 84% of Gen Xers who are offered a savings plan through work participate in their plans, their average contribution percentage —7% of salary — may not be enough to achieve their retirement goals. Experts generally recommend saving at least 10% to 15% of salary throughout a working career, and even higher percentages may be required for those who start saving later. When you turn 50, take advantage of annual “catch-up” contributions that allow you to save an additional $1,000 in an IRA and an additional $6,000 in most employer-sponsored plans.
Keep your savings working. More than one out of four Gen Xers have used their 401(k) accounts for purposes other than retirement — cashing out when changing jobs, taking early withdrawals (which may include penalties), or borrowing against their account balances.6 Instead of tapping retirement funds, it’s wiser to keep a separate emergency fund and to save for special purchases outside of a retirement account.
Educate yourself and consider professional guidance. Sixty-five percent of Gen X workers say they do not know as much as they should about retirement saving and investing, and 58% would like outside advice. Yet only 35% work is no assurance that working with a financial professional will improve investment results. But by focusing on your overall objectives, a financial professional can provide education, identify strategies, and help you consider options that could have a substantial effect on your long-term financial situation. Every generation faces retirement challenges. The good news for Generation X is that there is time to turn those challenges into opportunities to prepare for a comfortable retirement.