For the first time ever, Gen X workers saw their 401(k) balances top those of Baby Boomers, Fidelity data showed.
Balances for Gen X workers who have saved for 15 years averaged $543,400, $200 more than Boomers, according to the financial services firm’s analysis of its more than 22 million accounts in the first three months of the year. Gen X, born between 1965 and 1980, is the next generation to retire after the Boomers born between 1946 and 1964 are now retiring.
Gen X is often referred to as the forgotten generation, sandwiched between the large and culturally powerful Boomers and Millennials. It’s also the first generation to start working after pension plans were replaced by 401(k)s. Surveys have shown that many do not have enough to retire, but Fidelity’s report shows some green shoots.
If the trend continues, that’s “a good thing all around,” said Mike Shamrell, Fidelity’s vice president of workplace thought leadership.
What drives the trend?
Two things, Shamrell said.
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- Boomers are retiring, so they’re not contributing to their nest egg and, instead, are drawing down their 401(k) savings, as they should.
- At the same time, Gen X is approaching retirement, so they are more aggressively saving as much as they can.
In fact, Gen X on average saved more of their annual salary than what Fidelity recommends. Fidelity suggests that workers save 15% of their salary, including employer contributions, and Gen X topped that at 15.2%.
“That’s all healthy in itself, but there’s more good news,” Shamrell said. “When you turn 50 (years old), you can make supplemental contributions, and 14.5% of Gen Xers are making supplemental contributions.”
A top-up contribution is extra money that older workers can put into their retirement plans. For 2024, the recovery contribution is an additional $7,500 above the $23,000 limit for everyone else, for a total of $30,500.
Will it be enough for Gen X to retire?
Gen X’ers who have consistently saved in their 401(k) plan may have a nice nest egg by the time they retire, but there are few of them, said the nonprofit National Institute for Security Research group. Pension (NIRS).
After examining 2020 Census Bureau data, NIRS found a large discrepancy between median and median savings, with the average employer-sponsored retirement account at $173,553 and the median at $50,000. Two percent had zero balances, he said.
“It is a function of a relatively small number of people successfully saving significant amounts for retirement, while many others struggle to save at all,” NIRS said.
Dan Doonan, executive director of NIRS, said in a statement “this really isn’t surprising given the terrible hand retirement has been dealt to the spanner generation. Most Gen Xers don’t have a retirement plan, they have lived through multiple economic crises, wages are not keeping up with inflation, and costs are rising, the American Dream of retirement will be a nightmare for many Gen Xers.
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What are the retirement strategies for Gen X?
The good news is that Gen X still has time. The oldest are about 58, four years shy of the earliest Social Security claim age of 62, while the youngest are in their early 40s, just beginning their prime working and earning years.
Gen X seems aware that retirement is nigh with plans to waste no time.
Sixty-three percent said one of their top three goals in the next five years is to save enough and plan for a comfortable retirement, according to Allianz Life’s 2024 Annual Retirement Study of 1,000 adults. This is up from 56% last year.
“Saving in general is essential for retirement,” said Kelly LaVigne, Allianz Life’s vice president of consumer insights.
Some steps Gen X should take include:
“For Gen Xers, retirement is no longer such a distant idea,” LaVigne said. “This can be stressful, but by preparing now, they can create a strategy that will help them seek their ideal retirement. The good news is that it’s never too late to prepare for retirement. You might want to start sooner, but you’ll never want to wait longer.”
Medora Lee is a USA TODAY money, markets and personal finance reporter. You can reach him at [email protected] and sign up for our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
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