Fifty-seven percent of U.S. workers say they’re behind on their retirement savings, according to Bankrate’s 2024 Retirement Savings Survey. But no group says they’re behind more than Gen X. A whopping 68 percent of Gen X workers say they’re lagging when it comes to retirement savings.
The first edge of Gen X, which ranges in age from 44 to 59, is on the cusp of retirement, and they still have time and a handful of strategies to significantly improve their savings and retirement. Here’s how Gen X — and plenty of other Americans — can turbocharge their savings.
7 ways Gen X can accelerate their retirement savings
Gen X — and all Americans — can turbocharge their retirement savings, but basically all strategies focus on three major action categories:
- Save and invest more
- Invest in higher-return assets
- Give yourself more time
Those strategies are your tried-and-true ways to set up your retirement, and unfortunately, retirement savers have no silver bullets short of winning the lottery. Working with a financial advisor can help you make the smartest decisions for your retirement savings.
1. Set up that 401(k) plan
If you haven’t done so, the fastest way to get started on saving for retirement is to set up your employer-sponsored 401(k) or 403(b) plan. These plans allow you to invest in high-return assets, and they defer or eliminate taxes, so you can compound your gains faster without the tax drag. The money is pulled straight from your paycheck and deposited directly into your account, meaning you set it up once and then your 401(k) plan takes care of all future withdrawals.
The 401(k) plan comes in two varieties: the traditional 401(k) and the Roth 401(k). The big difference is that the traditional plan allows your contributions to go in tax-free and you’ll pay taxes only when the money comes out of the account. In contrast, with the Roth 401(k), your contributions go in after-tax, but you won’t pay taxes again on any gains or withdrawals.
2. Max it out – then max out the catch-up contributions
The 401(k) plan has a maximum annual contribution, and you should try to hit that level. For 2024, the maximum contribution is $23,000, but the amount rises to $23,500 in 2025. Those age 50 and over can add in an additional $7,500 catch-up contribution each year, too, so you can really sock away cash in your tax-advantaged account.
That leading edge of Gen X will also soon be able to save even more each year in a 401(k), too. In 2025, the catch-up contribution for workers age 60 to 63 will rise to $11,250.
3. Get your full 401(k) employer match
Most employers offer a matching contribution if you make a contribution to your 401(k). So if you make a deposit, they make a deposit. Employees can often get 3 to 5 percent of their salary as a match. This money is the easiest, safest return you’ll ever make, and experts advise workers to take full advantage, even if they can’t max out their annual contribution.
The 401(k) matching funds can go into high-return investments, just like your regular contribution.
Need an advisor to help you set your goals?
Bankrate’s AdvisorMatch can connect you to a retirement advisor to help you achieve your financial goals.
4. Invest more in stocks, less in bonds
Beyond getting more savings into your investment accounts, you can invest in high-return assets such as stock funds, allowing you to compound your money faster. A diversified portfolio of stocks has outpaced bonds and other investments over time. So, it can make sense to invest more of your nest egg in these high-return assets, multiplying your greater savings even faster.
For example, the S&P 500 stock index — a collection of hundreds of America’s top companies — has returned an average of about 10 percent annually over time, much more than you could typically earn from bonds. You can purchase the whole collection of stocks by buying an S&P index fund — most 401(k) plans offer them — and your returns will mirror whatever the index returns.
The downside of investing more in stocks, however, is that they’re more volatile in the short term, so the returns can be lumpy, even though stocks are arguably the best long-term investment.
5. Give yourself more time before retirement
Time is your biggest ally when it comes to investing. The more time you give yourself to invest in high-return assets, the greater your wealth is likely to be. If you can delay tapping your retirement account for longer, you’ll be able to compound your gains even more.
The younger cohort of Gen X has an advantage here, and the extra years before retirement can really accelerate the total amount of money they’re able to accumulate. Even five years can make an enormous difference if you’re really dedicated to saving more.
The leading edge of Gen X has less time to compound money but can make a serious effort, even if they don’t have the luxury of time. For most, that means working longer. But this avenue offers two advantages: the ability to save more and not tap limited savings, giving your money more chance to compound. Every year you can delay, the greater the potential savings.
6. Full retirement plan? Consider other account types
So you’ve maxed out your 401(k) retirement plan. There’s no need to stop there. Any American with earned income can contribute to an IRA (although your income level will affect tax deductibility), whether they have a 401(k) account or not. And you can always open a taxable brokerage account, where you can also invest in high-return stock funds.
An IRA is similar to a 401(k) in several ways. With a traditional IRA, you can invest on a pre-tax basis, meaning you’ll pay no tax on contributions. Taxes come out only when you withdraw funds later. In contrast, a Roth IRA allows you to contribute with after-tax money, but the money can compound with no taxes, and withdrawals in retirement are tax-free.
The best brokers for stocks can help you find strong stock funds that can multiply your money.
7. Skip prepaying the mortgage and other non-retirement savings
If you’re serious about building your retirement savings, other savings and expenses have to take a back seat. Prepaying a mortgage, for example, may not be a great decision, since it ties up cash in your house and you’re unable to invest it in higher-return investments. Similarly, if you’re saving money for a child’s education through a 529 plan, it’s important to focus on retirement.
A financial advisor can help you prioritize your savings and make the smartest decisions for your retirement.
Bottom line
With some serious concerns about the long-term solvency of Social Security, Gen X cannot take it for granted that they’ll have the same level of income that previous generations have had. Therefore, it’s vital that Gen X take advantage of their remaining working years to get their finances in order.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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