Americans in their 40s and 50s are catching up on their retirement savings. But can they win the race against the clock? Gen X has faced unique challenges that slowed down or stalled their retirement savings efforts.
Many entered the workforce during economic downturns. This hurt their ability to save consistently. Then came student loan debt, mortgages, and rising costs of living.
These further drained their wallets. It forced many to play catch-up with their retirement savings later in life. The good news from Fidelity suggests that Gen X is finally making headway.
Their average 401(k) balance is reaching new highs. Many are now contributing more aggressively to their retirement accounts. Fidelity reports that the average 401(k) balance for retirement savers is now at its third-highest level ever recorded.
This is driven by increased contributions and market gains. For Gen X in particular, substantial growth has been observed. Gen Xers who have been saving for 15 years saw their account averages rise to $554,000 in the second quarter of 2024.
This is up from $543,400 in the previous quarter. Individual retirement accounts (IRAs) have also seen a boost. Fidelity reports that the average IRA balance for Gen X has increased.
Many are taking advantage of catch-up contributions. This allows individuals aged 50 and older to contribute an additional $1,000 annually to their IRAs.
Gen X boosting retirement contributions
Still, plenty of Gen Xers remain worried about whether they’re saving enough. A survey by Northwestern Mutual in April revealed that the generation believes it will need $1.56 million to retire comfortably. But they also give themselves a 42% chance of outliving their current savings.
No two retirement plans are the same. This means a Gen Xer’s ability to truly catch up depends on their retirement goals. But it’s not too late to build the kind of cushion that can make one’s golden years comfortable.
One of the first steps is taking full advantage of catch-up contributions to retirement accounts. For 401(k) plans, individuals aged 50 and older can contribute an additional $7,500 annually, on top of the standard contribution limit. Similarly, those with IRAs can contribute an extra $1,000 per year.
These catch-up contributions can significantly boost retirement savings over time. It’s also time to consider a more aggressive investment strategy. This means diversifying portfolios and focusing on growth-oriented investments to maximize returns and start catching up.
Remember, this strategy should be revisited as retirement approaches to protect assets. Reducing or eliminating high-interest debt is crucial for freeing up more money to save for retirement. High-interest debt, such as credit card balances, should be prioritized for repayment.
Additionally, paying off mortgages or other large debts before retirement can significantly reduce monthly expenses and improve cash flow in retirement. Finally, seeking professional financial advice is a smart way to get, and stay, on track. A financial advisor can help create a personalized retirement strategy.
This accounts for individual goals, risk tolerance, and time horizon. As Gen Xers push to catch up on retirement savings, making informed and strategic financial decisions is more important than ever. With the right plan and a committed approach, retiring comfortably is still within reach.
- Yahoo.”Americans in their 40s and 50s are catching up with their retirement savings — can they win the race against the clock?”.
- TheStreet.”How to offset inflation risk and save more for your retirement”.
- WFMyNews2.”Retirement-age Americans regret two big financial mistakes”.