Reflections

Who wants to be a millionaire? Gen X’ers sound off on their expected retirement needs

Gen XBelieve it or not, the first Gen X’ers1 are turning 50.  Members of the 401(k) generation – the first group of workers to come of age when defined benefit (pension) plans were starting to disappear – Gen X’ers were given the responsibility to save for retirement on their own.  So, how have they fared?

The majority of Gen X’ers estimate that they will need to save $1 million for retirement.  This is troubling as the average Gen X’er only has about $70k in retirement accounts.  Even the 20% of Gen X’ers who have more than $250,000 in retirement savings are still a long way from the $1 Million nest-egg most Gen X’ers say they will require.  These six findings from the 15th annual Retirement Survey by the Transamerica Center for Retirement Studies®* can help guide Gen X’ers toward solving their retirement shortfall.

  1. If college tuition bills are paid, try upping the contribution level now that you can afford to. The median 401(k) contribution rate among Gen X’er’s is 7%. This time before retirement should be peak savings years.

  2. Build an emergency fund of cash. Nearly one-third of Gen X’ers have taken a loan or early withdrawal from a 401(k) or IRA.  With an emergency fund, you can potentially avoid early withdrawal. ”Leakage” from retirement plans will severely limit your retirement savings growth.

  3. Keep a balanced mix of retirement and non-retirement assets and you’ll thank yourself later. 58% of Gen X’ers are currently saving for retirement, and building non-retirement plan savings will provide you more flexibility to avoid high tax rates in retirement. Remember, money taken from Traditional IRA’s and 401(k)’s in retirement is considered taxable income.

  4. Take advantage of the “catch-up” contribution. 49% of Gen X’ers are unaware of this. These rules allow workers aged 50 and over to contribute an extra $6,000 in 401(k)’s and $1,000 in IRA’s annually.

  5. A well-defined, written plan can show you what it will take to reach your retirement goal. While the majority of Gen X’ers have a retirement strategy, only 14% have a written plan. Don’t dream about your retirement needs, calculate them.

  6. Use the “Let’s Talk” tool on the right-hand sidebar and we’ll call or email you back. Only 35% of Gen X’ers are using a professional advisor. An advisor can help you develop a plan or show you if your current plan is on track.

While these six steps can help guide Gen X’ers towards a better retirement, they are also useful for anyone saving for retirement!

1Gen X, short for Generation X, is the generation born after that of the baby boomers (roughly from the early 1960s to mid-1970s).

*The Transamerica Center for Retirement Studies Annual Retirement Study can be found here:
http://www.transamericacenter.org/docs/default-source/resources/center-research/tcrs2014_sr_generation_x.pdf

Data here is obtained from what are considered reliable sources as of August 2014; however, its accuracy, completeness, or reliability cannot be guaranteed.  (Retirement limits updated as of 3/31/2019.)

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