Boost Your Retirement: 7 Smart Tips for Gen Xers to Save Big!
December 14, 2024
0 4 minutes read
Did you know that a staggering 57% of American workers feel they’re falling short on retirement savings? That’s right—over half of us are behind, and the numbers are even more alarming for Generation X. A jaw-dropping 68% of Gen X employees are worried about their savings for retirement. It’s time to flip that narrative!
As the older edge of Gen X, aged between 44 and 59, gets closer to retirement, there’s still time to catch up and build a robust nest egg. With the right strategies, anyone can supercharge their retirement savings! Here’s how Gen X—and all Americans—can kick their savings into high gear.
Let’s break it down: turbocharging your retirement savings boils down to three main action categories. Ready to roll up your sleeves? Here’s what you need to do.
These tried-and-true strategies are your roadmap to retirement success. Unfortunately, there’s no magic bullet—unless you count winning the lottery! However, teaming up with a financial advisor can help ensure you’re making the smartest decisions for your retirement.
If you haven’t already, the quickest way to start saving is to tap into your employer-sponsored 401(k) or 403(b) plan. These plans allow you to invest in high-return assets while deferring or eliminating taxes, letting your money grow faster without the tax burden. Plus, contributions are automatically deducted from your paycheck, so you set it up once and forget about it!
When it comes to 401(k)s, there are two primary flavors: the traditional 401(k) and the Roth 401(k). The traditional plan lets your contributions go in tax-free, with taxes applied when you withdraw funds. On the flip side, the Roth 401(k) asks for after-tax contributions, but you won’t owe taxes on gains or withdrawals later. Choices, choices!
Make it a goal to hit the maximum annual contribution for your 401(k); for 2024, that’s $23,000, rising to $23,500 in 2025. If you’re 50 or older, you can also make an additional $7,500 catch-up contribution each year. That’s a hefty chunk of change to get into your tax-advantaged account!
And there’s more good news! In 2025, those aged 60 to 63 can increase their catch-up contribution to $11,250. The opportunity to save more is knocking!
Employers often throw in a matching contribution if you contribute to your 401(k). This means additional funds are added to your account based on your contribution—often 3% to 5% of your salary! This is the easiest money you’ll ever earn, so make sure to take full advantage, even if you can’t max out your contributions.
The matching funds from your 401(k) can also be directed into high-return investments, just like your regular contributions.
Need help setting your financial goals?
AdvisorMatch can connect you with a retirement advisor who will help you navigate your way to financial success.
To amplify your savings, consider investing in high-return assets like stock funds. Historically, a diversified portfolio of stocks has consistently outperformed bonds and various other investments. By allocating more of your retirement funds into these high-yield assets, you can accelerate the growth of your savings.
Take, for instance, the S&P 500 stock index, which represents hundreds of top American companies and has delivered an average annual return of about 10%. That’s significantly better than what you’d typically earn from bonds. By investing in an S&P index fund—commonly available in 401(k) plans—you can effortlessly align your returns with the index’s performance.
Keep in mind, however, that investing heavily in stocks can introduce short-term volatility. While stocks are often hailed as the best long-term investment, their returns can fluctuate significantly in the short run.
Remember: time is your greatest ally in the investment game. The longer you invest in high-return assets, the more your wealth is likely to grow. If you can hold off on tapping into your retirement funds longer, you’ll be able to reap even more substantial gains.
Younger members of Gen X have the upper hand here—those extra years can lead to considerable accumulation of wealth. Just five more years of dedicated saving can create a monumental difference.
For older Gen Xers, while time may be limited, you can still make a significant impact. Many may find that extending their working years not only allows for increased savings but also prevents the need to dip into limited savings early. The more you can postpone retirement, the more your savings can grow!
Already maxed out your 401(k)? Don’t hit the brakes just yet! Any American with earned income can contribute to an IRA, regardless of whether they have a 401(k). You could also consider opening a taxable brokerage account to invest in high-return stock funds.
An IRA operates similarly to a 401(k). With a traditional IRA, you can invest pre-tax, meaning no taxes on contributions until you withdraw. Alternatively, a Roth IRA allows after-tax contributions, enabling your money to grow tax-free, with tax-free withdrawals in retirement.
Connect with the best brokers for stocks to discover strong stock funds that can exponentially grow your wealth.
If building your retirement savings is your priority, it’s time to make some tough choices. For instance, prepaying your mortgage may not be the best use of cash, as it ties up your money in your home when it could be growing in higher-return investments. Likewise, while saving for a child’s education in a 529 plan is critical, don’t let it overshadow your retirement planning.
A financial advisor can help you map out your priorities and make the best decisions for your retirement.
With growing concerns surrounding the long-term viability of Social Security, Gen X can’t afford to take future benefits for granted. It’s crucial to seize every remaining working year to fortify your financial future.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Past performance is no guarantee of future results.
