Generation X is creeping closer to retirement, but are the "slackers" ready? Gen-Xers may have a lot of financial ground to make up for several reasons, including a late start in the workforce and brutal losses stemming from the dot-com crash and Great Recession. These are 13 ways to get back on track, from making sure enough is going into retirement accounts to avoid tapping a 401(k) too early.
Experts say simply figuring out your retirement savings situation, and where it should be, is the first step to saving more. Use a simple retirement calculator, taking into account age, projected retirement age, assets, and even projected inflation.
One of the simplest ways Gen-Xers can boost retirement savings is by contributing enough to 401(k)s to get the full employer match. For instance, if an employer matches 50 cents on the dollar up to 5 percent of pay, but a worker contributes only 3 percent, that's leaving money on the table.
Older Gen-Xers should take full advantage of rules allowing savers who are over 50 to contribute more to retirement accounts. They can sock away up to $24,000 a year in a 401(k) -- $6,000 more than the under-50 limit of $18,000, the Motley Fool advises, and contribute $1,000 more than the usual $5,500 yearly limit to a traditional or Roth IRA.
The idea of working past traditional retirement age is no longer a nuclear option: 55 percent of Gen-Xer survey respondents say they plan on working past 65, says the Transamerica Center for Retirement Studies. Working just five more years, until 70, could mean a marked bump in savings, from continued wages and giving time for investments to grow. A couple of typical retirees scrambling to boost their nest egg could see as much as a 68 percent bump in savings from that extra time in the workforce.
Delaying the start of Social Security checks can fatten them up nicely later in life -- they'll be about 24 percent bigger by holding off until 70 instead of taking benefits at 67. And if you're still working anyway, it might mean that more Social Security pay becomes taxable, experts warn, making it even more important to wait.
Gen-Xers are in their prime earning years, and more likely than ever to reap the benefits of career advancement. One easy way to boost retirement accounts? Every time you get a raise, earmark half for retirement. It also helps rein in "lifestyle creep" -- when a new salary brings with it new (but unnecessary) expenses.
Gen X has been hesitant to wade into the stock market because of the demoralizing dot-com bust and subsequent recession, which hit right when many Gen X workers were starting to amass wealth, Zacks.com says. But experts say sitting out the current bull market could be quite costly, when even small investments can add up.
Overall, Gen X are more aggressive investors than Boomers, according to Time. But don't always aim for the moon. Even trying to match the stock market's overall return by investing in a broad-market index fund can be a good middle-ground strategy. And a drop in the stock market can still present a buying opportunity for those who take the long view.
A Health Savings Account is "the most under-appreciated retirement tool available," The Motley Fool says. Gen-Xers with high-deductible insurance plans can park up to $3,400 in an HSA every year, or $4,400 once they hit 55. These tax-deductible contributions will grow tax-free, and there's no taxes on disbursements for qualifying medical costs. Even if the cash isn't needed for health care, you're only on the hook for standard income tax if you're 65 or older.
Gen-Xers with kids closing in on college should consider whether new college savings contributions might be better off in a Roth IRA than a 529 college savings plan. Roth money can be used for retirement or purposes other than college without paying taxes and penalties on the earnings, which isn't the case with a 529. If Junior lands some major scholarships or decides against college, that money can stay put and grow for retirement trouble-free.
Retirement savings are essential, but Gen-Xers court disaster by neglecting emergency savings and rainy-day funds; rainy-day funds can take care of pricey annoyances such as a broken appliance or a broken-down car, while emergency funds should cover up to six months of living expenses in case of a catastrophe such as job loss or major illness. What they have in common: They reduce the risk of drawing on retirement savings early, which can slash earnings and subject withdrawals to painful taxes and penalties.
Socking away more for retirement is impossible when you don't get to keep your money to begin with. But Gen-Xers shouldn't look at debt and retirement savings as mutually exclusive -- they can still save up the latter while paying off the former. To do this, prioritize: In general, it makes most sense to tackle high-interest "bad debt" such as credit cards before a low-interest home equity loan or student loan.
Gen-Xers tend to be wary of investment planners' sales pitches, Investment News reports. The fact that many advisers require clients to have significant assets also complicates matters. One option that might help bridge the gap: Online "robo advisers" with low minimums and clearer fee structures. They might not be a full substitute for a flesh-and-blood financial planner, but they're a significant step in the right direction.