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Gen X Surpasses Boomers in 401(k) Balances: Is It Enough for Retirement?

For the first time, Gen X workers have seen their 401(k) balances surpass those of Baby Boomers, according to Fidelity data. Gen X workers who have been saving for 15 years now have an average balance of $543,400, which is $200 more than Boomers. This analysis, based on more than 22 million accounts from the first quarter of the year, highlights the financial strides Gen X—born between 1965 and 1980—has made as they approach retirement, following Boomers who are currently retiring.

Often referred to as the forgotten generation, Gen X is sandwiched between the influential Boomers and Millennials. This is also the first generation to primarily use 401(k) plans instead of traditional pensions. Despite concerns that many Gen Xers are not adequately prepared for retirement, Fidelity’s report offers some optimism.

If this positive trend continues, it’s beneficial for everyone, said Mike Shamrell, Fidelity’s vice president of workplace thought leadership.

Factors Driving the Trend

Two key factors are driving this trend, according to Shamrell:

  1. Boomers are retiring and thus are no longer contributing to their 401(k)s, instead drawing down their savings.
  2. Gen X is ramping up savings as they approach retirement, contributing more aggressively to their accounts.

On average, Gen X is saving 15.2% of their annual pay, surpassing Fidelity’s recommendation of 15%, which includes employer contributions. Additionally, 14.5% of Gen Xers are making catch-up contributions, allowing those over 50 to save an extra $7,500 annually on top of the $23,000 limit, totaling $30,500 for 2024.

Will It Be Enough for Gen X to Retire?

While consistent savers in Gen X may have a substantial nest egg by retirement, the National Institute on Retirement Security (NIRS) warns that many Gen Xers are not saving enough. Analyzing 2020 Census Bureau data, NIRS found a significant gap between average and median savings: the average employer-sponsored retirement account holds $173,553, while the median balance is just $50,000, with 2% having zero balances.

“This disparity highlights that a small number of people are successfully saving substantial amounts, while many others struggle to save at all,” NIRS stated. Dan Doonan, NIRS executive director, noted that Gen X has faced numerous challenges, including the absence of pension plans, multiple economic crises, stagnant wages, and rising costs, making retirement a daunting prospect.

Retirement Strategies for Gen X

The good news is that Gen X still has time to improve their retirement outlook. The oldest Gen Xers are around 58, nearing Social Security’s earliest claiming age of 62, while the youngest are in their early 40s, just entering their prime earning years. Recognizing the urgency, 63% of Gen Xers listed saving for a comfortable retirement as a top priority within the next five years, up from 56% last year, according to Allianz Life’s 2024 Annual Retirement Study.

Steps Gen X Should Take

  1. Maximize retirement savings by taking full advantage of tax-deferred opportunities, including catch-up contributions and health savings accounts (HSAs).
  2. Develop a comprehensive plan and seek professional financial advice, especially for complex finances and tax strategies.
  3. Account for healthcare costs, which are likely to rise as people live longer and face more health issues.

“Retirement is no longer a distant concept for Gen X,” said Kelly LaVigne, Allianz Life vice president of consumer insights. “By preparing now, they can create a strategy to achieve their ideal retirement. It’s never too late to start preparing. You might wish you had started sooner, but you’ll never regret starting now.”

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