For those from Generation X who are now in their 40s and 50s, retirement might be right around the corner .
Nevertheless, numerous individuals are concerned that they might not have accumulated sufficient savings to sustain them once they arrive, as reported by Allianz Life Insurance. 2024 annual retirement study .
As reported by Fidelity Investments, which manages more 401(k)s than any other company in America, the typical 401(k) savings amount for Generation X—those individuals born between 1965 and 1980—is $54,500 as of Q1 2024, based on information provided to Pawonation.com Make It.
Nevertheless, that is quite distant from their retirement savings objectives. Typically, Generation X members think they'll require approximately $1.56 million for a comfortable retirement, as stated by Northwestern Mutual. 2024 Planning and Progress study.
Retirement saving obstacles
Several elements have stopped members of Generation X from saving additional funds for their retirement.
Firstly, numerous individuals commenced their savings efforts later than previous generations. The data from Fidelity indicates that Generation X members typically initiated their retirement savings around age 36, whereas Millennials and Generation Z members started much earlier, at ages 27 and 20 respectively. 2024 Status of Retirement Planning study.
This could be due to many Gen X workers having established their careers before tax reforms like automatic enrollment—whereby employees are enrolled in their employer’s 401(k) plan by default—took effect, according to Anne Lester, a retirement specialist and the author of " Your Optimal Financial Path: Save Wisely Today for the Tomorrow of Your Dreams ."
"When Generation X began their careers, they needed to decide if they wished to join their employer’s 401(k) program," she explains to Pawnation.com Make It. "Generally, the enrollment percentages are as low as 60% When individuals must register voluntarily, participation rates typically hover around 10%, whereas when they are automatically enrolled, those figures jump to above 90%.
Ways for Generation X to enhance their retirement funds
The positive aspect is that it isn't too late for Generation X members to align themselves with their retirement saving goals.
Begin by concentrating on your retirement savings rate This refers to the portion of your yearly earnings that you allocate towards retirement savings. Fidelity recommends A savings rate of 15% might suffice, yet you could be required to raise this figure based on your objectives.
Lester explains, “The amount you should save depends on how much you lag behind and your current age. If you’re in your thirties and just starting out without having saved anything yet, you might need to set aside around 15 percent of your income. However, if you find yourself in your forties with nothing saved up, you could potentially require a savings rate closer to 30 percent.”
Lester suggests that it might also be beneficial to review your expenditures and identify areas where you could reduce costs, allowing you to reallocate those funds towards your retirement savings.
"Reflect on this question: ‘In what ways can I reduce my current lifestyle expenses to increase savings and slowly adapt to spending less?’ This could very well describe your future after retirement," she states.
Individuals aged 50 and above can do this as well. catch-up contributions To tax-advantaged retirement accounts like 401(k)s and individual retirement accounts. These extra contributions enable employees to exceed the yearly cap. In 2024, individuals aged 50 and over will be allowed to make larger deposits. extra $7,500 to their 401(k), 403(b) , governmental 457(b) or SARSEP plan.
Moreover, according to Lester, members of Generation X could find value in consulting a financial advisor or planner to create a personalized retirement strategy tailored to their specific objectives and obstacles.
Securing a consultation might be wise simply to grasp your current position, your desired future state, and how your earnings could appear after retirement.
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