According to data provided to CNBC Make It by Fidelity Investments, the largest 401(k) provider in the US, the median 401(k) account balance for Gen Xers, defined as people born between 1965 and 1980, will be $54,500 as of the first quarter of 2024.
But that’s far from this generation’s retirement savings goal: On average, Gen Xers believe they need about $1.56 million to retire comfortably, according to a Northwestern Mutual survey. 2024 Plans and Progress study.
Several factors are preventing Gen Xers from saving more for retirement.
First, many people started saving later than younger generations: On average, Gen Xers started saving for retirement at age 36, while millennials and Gen Zers started at age 27 and 20, respectively, according to a Fidelity study. Status of 2024 Retirement Plan study.
That could be because many Gen X workers were well into their careers when tax reforms, such as automatic enrollment in employer 401(k) plans, went into effect, said retirement expert and “Your Best Financial Life: Save Smart Now for the Future You Want“
“When Gen Xers started working, they had to choose whether or not to join their company’s 401(k) plan,” she told CNBC Make It. “Participation rates are typically About 60% It’s over 90% when users have to register themselves, but over 90% when they’re automatically registered.”
The good news is that it’s not too late for Gen Xers to start saving for retirement.
First, look at your retirement savings rate. Your retirement savings rate is the percentage of your income you set aside each year for retirement. Fidelity Recommends Your savings rate should be 15%, but you may need to increase that number depending on your goals.
“Depending on how far behind you are and how old you are, you need to save more,” Lester says. “If you’re in your 30s and haven’t started yet, you might need to save 15% of your net worth, but if you’re in your 40s and have zero savings, your savings rate might be closer to 30%.”
Lester also says it can be helpful to review your spending to see where there is room to cut back and redirect that money towards retirement savings.
“Ask yourself, ‘How can I lower my standard of living so that I can save more and gradually get used to having less money to spend?’ Because that may be what your life will look like in retirement,” she says.
Anyone age 50 or older can make catch-up contributions to tax-advantaged retirement accounts, such as 401(k)s and individual retirement accounts. These additional contributions allow workers to contribute above the annual limits. In 2024, workers age 50 and older can make catch-up contributions to tax-advantaged retirement accounts, such as 401(k)s and individual retirement accounts. Additional $7,500 401(k) 403(b),government 457(b) or Cercep plan.
Additionally, Gen Xers may benefit from meeting with a financial advisor or planner who can help them create an individualized retirement plan that fits their unique goals and challenges, Lester says.
“It’s wise to get a consultation just to understand where you are, where you want to go and what your retirement income will look like.”
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