A recent article from Business Insider revealed a startling statistic — the average Gen X household has only about $40,000 saved for retirement. Considering many Gen Xers are now in their 40s and 50s and approaching retirement age, this amount is alarmingly low according to financial experts.
The harsh reality is that many Gen Xers are behind where they should be for retirement, but, it’s still possible to give your nest egg a big boost in your 40s and 50s. The key is taking action now before it’s too late.
What’s the Target Amount for Gen X Retirement Savings?
According to Jim Penna, senior manager at VectorVest Inc., a common guideline financial advisors reference is to have about 10 times your annual income saved by retirement age. So if you earn $100,000 per year, your goal would be around $1 million in retirement savings.
Specifically looking at Gen Xers, who are now between ages 43-58, Penna suggested a savings target of around $500,000 by age 50. Of course, considering the wide age range defining Gen X, it can be difficult to pick a single savings number goal. As Penna noted, “There is a big difference in the retirement savings of a 43-year-old vs a 57-year-old. That is why I am using 50 years of age.”
Either way, $40,000 is clearly not enough for Gen Xers to maintain their standard of living in retirement.
Jeff Rose, founder of Good Financial Cents, provided another benchmark for Gen X retirement savings. He suggested that by their 50s, Gen Xers should aim to have about six times their annual salary set aside. “For instance, if they’re earning $60,000 per year, they’d ideally have $360,000 stashed away,” he explained. “This amount positions them for a comfortable retirement, considering life expectancies and potential health care costs.”
Why Is This Retirement Savings Cushion Critical for Gen Xers?
Reaching these higher retirement savings targets provides Gen Xers a few key advantages. Primarily, it helps ensure they can maintain their current lifestyle without regular employment income.
“Having a substantial retirement savings buffer helps ensure Gen Xers can maintain their current lifestyle even without regular employment income,” said Rose. “Also, as life expectancies increase, retirement periods are getting longer, requiring more savings.”
Penna also shared the importance of having an adequate retirement cushion. “To ensure a comfortable retirement it is mandatory to regularly review and adjust your retirement savings plan. You must be sure to maximize contributions to retirement accounts and invest wisely. It is still possible to plan and save for retirement as Gen Xer. Stay disciplined and stick to your plan to reach your goals.”
Tips for Gen Xers To Boost Retirement Savings
“If the sad state of retirement savings has the average Gen X household with only $40K saved, the question that needs to be addressed is not how much they have now, which is nowhere near enough. The issue is what to do NOW!” said Penna.
While the average Gen Xer may be far behind on their retirement goals, the good news is that there is still time to substantially boost savings in your 40s and 50s. Here’s how.
Stay Invested in the Market
“Especially in your 40s, keep a growth mindset with your investments,” Rose recommended. “As you near retirement, gradually shift to more conservative assets, but don’t rush — you likely still have decades ahead.” Keeping a reasonable portion of your portfolio in stocks can allow you to continue growing your nest egg.
Explore Gig Work
Even if it’s just a few hours per week, freelance work or side gigs can provide extra cash that you can save for retirement. Rose suggested checking sites like Upwork or TaskRabbit to find opportunities. The key is to be disciplined about saving this extra income.
Consider Roth IRA Conversions
If you have a sizable traditional IRA or expect higher taxes in retirement, Rose recommended looking into Roth IRA conversions. “You’ll pay taxes now, but withdrawals in retirement will be tax-free,” he explained. Work with a financial advisor to crunch the numbers and see if this strategy makes sense for you.
Get Expert Help
Work with a financial advisor to review your specific situation. They can help develop a plan to get your retirement savings back on track. “First, know that it is never too late to plan and save for retirement, especially if you are in your 40s or 50s. But you must have a plan and the discipline to follow it,” said Penna. An advisor can create that customized game plan.
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