Gen X Faces Retirement Savings Gaps: Strategies to Build Wealth

As Generation X approaches retirement age, many are focused on shoring up their savings. The decline of traditional pensions and uncertainty around Social Security prompt Gen Xers to explore diverse funding strategies. By utilizing tax-advantaged accounts, making informed investments, and considering catch-up contributions, they enhance their retirement prospects. Effectively managing 401(k)s, IRAs, and other opportunities can substantially boost their long-term savings. For those who find themselves behind, adjusting their asset allocations and maximizing compounding growth may prove beneficial.

A financial advisor could assist in creating a tailored retirement plan suited to individual goals and financial circumstances.

Current State of Gen X Retirement Savings

A stark disparity exists for many Gen Xers between their desired retirement savings and their actual situation. According to Nationwide’s 10th Annual Advisor Authority survey, 20% of Gen Xers believe they need at least $2 million to retire comfortably, yet only 7% have achieved this goal. Additionally, 16% claim to have saved at least $1 million, while 30% report having less than $100,000 saved for retirement.

Schroders’ 2024 U.S. Retirement Survey further illustrates this gap. Gen Xers estimate they need $1,069,746 to retire comfortably, but predict they will only have amassed $602,944—creating a shortfall of $466,802, which is greater than anticipated deficits for both Baby Boomers and Millennials. Only 14% of Gen Xers feel confident about their savings, while 54% express concerns about running out of money during retirement.

The findings from various surveys highlight a disconnection between Gen X expectations and their financial realities. Gallup data shows that three out of four retirees report having sufficient funds for a comfortable life, yet Gen X remains cautious as retirement draws nearer.

Effective Retirement Savings Strategies for Gen X

Gen Xers aiming to bolster their retirement savings can utilize several key strategies to enhance their financial security and maximize assets.

1. Maximize Employer-Sponsored Retirement Plans

Contributing the maximum allowable amount to a 401(k) or 403(b) can significantly enhance retirement savings. In 2025, employees can contribute up to $23,500, with an additional $7,500 available as catch-up contributions for individuals aged 50 and older. Taking full advantage of any employer-matched contributions is also a prudent investment strategy.

2. Use IRAs for Additional Savings

Once workplace contributions are maximized, IRAs can provide valuable tax benefits. Traditional IRAs allow for tax-deferred growth, while Roth IRAs enable tax-free withdrawals during retirement. Eligible Gen Xers can contribute up to $7,000 annually, with those 50 or older able to add an extra $1,000.

3. Take Advantage of Health Savings Accounts (HSAs)

Health savings accounts (HSAs) offer a unique triple tax benefit: contributions are tax-deductible, funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. With healthcare costs being significant in retirement, an HSA can be an effective tool for saving. In 2025, individuals can contribute up to $4,300, while those with family coverage can contribute as much as $8,550.

4. Manage High-Interest Debt

High-interest debt can hinder saving for retirement. Focusing on paying down such debts improves cash flow, allowing for more investments and long-term growth. Strategies like the snowball or avalanche methods can facilitate faster debt repayment.

5. Delay Social Security Benefits

Although Gen Xers can start claiming Social Security at 62, delaying benefits until full retirement age or even 70 can lead to higher monthly payouts. For those who can afford to wait, this approach enhances guaranteed income during retirement.

6. Diversify Investments for Increased Growth

A diverse portfolio including stocks, bonds, and alternative investments offers Gen Xers better long-term growth potential. For those lagging in savings, allocating a larger percentage to growth-centered assets, considering risk tolerance and time horizon, can be advantageous.

7. Incrementally Increase Savings Rate

Even minor increases in retirement contributions can yield significant long-term benefits. Gradually raising contributions by 1% each year, or committing parts of raises and bonuses to retirement accounts, can enhance savings without drastic changes to lifestyle.

8. Leverage Catch-Up Contributions

Individuals aged 50 and older can utilize catch-up contributions to bolster their savings. Enhancing contributions to 401(k)s, IRAs, and HSAs in the closing years of work can help close savings gaps. Under the SECURE 2.0 Act, workers aged 60 to 63 may contribute an extra $11,250 to their 401(k), raising total possible contributions to $34,750 in 2025.

9. Consider Part-Time Work During Retirement

If retirement savings goals remain unmet, part-time work can provide extra income and help delay withdrawals from retirement accounts. This approach can extend savings’ longevity and enhance financial stability.

10. Collaborate with a Financial Advisor

Engaging a financial advisor can help Gen Xers develop a personalized retirement strategy, optimize tax approaches, and ensure that investment decisions align with long-term objectives. Professional input can be particularly valuable in navigating complex financial choices.

Illustrating the Savings Gap: A Case Study

Consider a hypothetical 52-year-old Gen Xer with $150,000 saved for retirement. Acknowledging the need to enhance savings, this individual, earning $120,000 annually, decides to implement various strategies.

The first step involves increasing their 401(k) contributions to the 2025 limit of $23,500 along with the $7,500 catch-up contribution, totaling $31,000 annually. Assuming a consistent annual return of 7%, their 401(k) could grow to over $575,000 by age 60.

Upon reaching 60, they can further benefit from the new enhanced catch-up contribution rules, permitting $11,250 per year for ages 60-63, solidifying their financial future.