Americans ages 44 to 59 are speeding towards retirement and in big financial trouble. Here’s why
Generation X is those born between 1965 and 1980, so today’s youngest Gen Xers still have a decent chunk of time to go before retirement. But for older Gen Xers, retirement is rapidly approaching and it’s time for them to get serious planning for their post-working years if they haven’t already.
The median household retirement account balance of Americans ages 45 to 54 was $115,000 in 2022, according to the Federal Reserve. A 2024 survey by AARP found that 20% of Americans ages 50 and over have no retirement savings and more than half (61%) are worried they will not have enough money to support them in retirement.
This a problem, especially because Social Security is facing a funding shortfall that could result in future benefit cuts. It’s clear that a lot of Gen Xers need to play catch-up.
Now it isn’t a good idea to plan to retire on Social Security alone, regardless of whether benefits are broadly reduced in the future. But some Gen Xers risk that fate. The good news, though, is that it’s not too late to make up for lost time.
Economically speaking, millennials are often said to be the least fortunate generation because many entered the workforce during the Great Recession of 2007-2009 and then had to endure the impact of the pandemic. Older Gen Xers, by contrast, enjoyed a relatively strong economy when they first entered the labor force in the 1990s. According to a study by the Federal Reserve Bank of St. Louis, Gen Xers, with their relatively high asset levels and moderate debt levels, had a higher average net worth at age 30 than baby boomers and millennials did at the same age.
But they too have faced their share of economic upheaval. They bore the brunt of the dot-com crash, and then, like millennials, had to survive the Great Recession, a period of stagnant interest rates, and the recent pandemic-spurred economic crisis that led to raging inflation.
Furthermore, during Gen Xers’ careers, many private sector companies shifted the burden of retirement savings onto their employees, pulling away from pensions and effectively forcing workers to fund their own retirement plans, including 401(k)s.
“This generation is the first to rely primarily on their own individual savings through 401(k)-like plans, and therefore, we refer to them as the ‘401(k) experiment’ generation,” said Goldman Sachs in a 2024 study. “Many Gen Xers were late to get started with personal savings and today almost half (45%) believe they are behind on their retirement savings (similar to working baby boomers but are considerably worse than millennials).”
As such, only 55% of Gen Xers are participating in an employer retirement plan, says the National Institute on Retirement Security. And Prudential reports that 55 year olds today have a median retirement savings balance of under $50,000.
If you’re in your mid-40s to late 50s with limited funds set aside for retirement, it’s time to make some changes. First, sign up for your employer’s retirement plan if you aren’t contributing to one already, or set up an IRA that allows you to make automatic contributions.
It’s important to start saving something each month for your senior years, even if you start small and work your way up. Use a calculator like this one to figure out how much you’ll need to save each month in order to have a decent-sized nest egg when you retire. One rule of thumb says you’ll need 80% of your pre-retirement income each year you’re retired.
Next, look carefully at your budget to find ways to trim your spending. For example, you can potentially free up thousands of dollars each year by downsizing from a two-car to a single-car household and finding ways to make sharing work.
Or, consider downsizing your home to reduce your mortgage payments, property taxes and maintenance costs. Just remember that if you signed or refinanced your mortgage a few years ago when rates plunged to record lows, your savings may not be as substantial if you’re looking at a much higher mortgage rate now. It’s also important to boost your credit score to qualify for the best mortgage rate possible.
Another option to consider is working a second job or side hustle to drum up more money for retirement savings.
Finally, do your part to reduce or eliminate credit card balances that may be costing you a lot of money in interest — money that could go toward your long-term savings instead. Experian reports that in 2023, Gen Xers had the largest average credit card balance across all generations — $9,123. By reducing spending and working a side gig, you can more easily chip away at that debt so it doesn’t stay with you as you approach your senior years.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
