As older members of Generation X approach retirement age, the pressure to save for their golden years is becoming increasingly intense. These individuals, born between 1965 and 1980, are faced with the daunting task of saving for retirement while also juggling the financial responsibilities of caring for both elderly parents and adult children. A recent report from global asset management company Natixis Investment Managers revealed that about half of Gen Xers fear they won’t have enough money to enjoy their retirement, with 31% believing they will never save enough to retire. This generation is caught in a financial tug-of-war, trying to balance saving for their own futures with supporting their families.
Gen X is the first generation of U.S. workers to rely primarily on 401(k) plans as their retirement vehicle after the shift away from traditional pensions in the 1980s. As retirement approaches, Gen X faces financial constraints, but financial experts assure that there are strategies to maximize savings despite the challenges. According to CFP Preston D. Cherry, who is a member of the CNBC Financial Advisor Council, “Generation X is the guinea pig for the 401(k).” The generational transition to 401(k) plans has forced Gen Xers to navigate investment decisions that their boomer parents never had to consider.
Marguerita Cheng, a certified financial planner and Gen X mother, describes this generation as having grown up in the 1970s amidst political turmoil and societal change. She characterizes Gen X as irreverent, independent, and somewhat skeptical. Despite their distinct characteristics, Gen X often feels overlooked in conversations about different generations, which tend to focus more on millennials and boomers. As they begin planning for retirement, Gen Xers carry the weight of decades of financial decisions, including timely saving for retirement, making responsible investments, and balancing family obligations.
The financial landscape for Gen Xers is further complicated by regrets about their past savings habits. More than half of this generation wishes they had saved more for retirement, citing day-to-day expenses, credit card debt, and housing costs as barriers to saving. The burden of caring for aging parents and supporting their children’s college education compounds these challenges. As a result, a significant portion of Gen X expects to live frugally in retirement, limiting their financial freedom in their later years.
Despite the obstacles they face, Gen X can capitalize on their peak earning years – typically in their 40s and 50s – to bolster their retirement savings. Financial planners recommend maximizing contributions to tax-advantaged accounts like 401(k) plans and individual retirement accounts. Additionally, individuals over 50 years old can take advantage of catch-up contributions to boost their retirement savings. By saving more from their income, Gen X can potentially retire earlier, highlighting the direct relationship between retirement savings rates and retirement age.
For Gen Xers who may be behind in their retirement savings, there are still opportunities to enhance their financial standing. While it may be challenging to make up for lost time, delaying claiming Social Security benefits until age 70 can increase monthly payments. Working past the traditional retirement age of 65 is another option for those who are able and willing. By leveraging these strategies and maximizing existing savings, Gen Xers can improve their financial outlook and secure a more comfortable retirement.