Fifty-five-year-old Americans have a median retirement savings of less than $50,000.
That’s bleak news for older Gen Xers who are only about a decade out from retiring — and a far cry from the target of having eight times your annual income saved by this age.
“A lot of folks are behind, and that has important longer-term implications for retirement,” David Blanchett, head of retirement research at PGIM DC Solutions, told Yahoo Finance. “It’s not easy. We can always find things that we’d rather spend the money on today than save for this thing that’s going to happen in 10 or 20 or 30 years.”
It’s not just the future that looks grim. They’re just squeaking by right now: More than one-third of 55-year-olds say they would have trouble putting together $400 to cover an emergency expense, compared to 19% of 65-year-olds and 15% of 75-year-olds, according to the survey from Prudential Financial.
It will take a ‘miracle’
Nearly half of Gen Xers report that it will take a “miracle” to be able to retire securely, according to a recent survey by Natixis Investment Managers. Nearly 7 in 10 say inflation has hurt their ability to save for retirement.
Another reason for the dismal savings balances for those 55-year-old Gen Xers is that they typically did not start saving for retirement until age 31, according to Charles Schwab’s 2024 Modern Wealth Survey. That’s compared to Gen Z starting at 18 and millennials at age 24.
In the recent Allianz Life 2024 Annual Retirement Study, only 6 in 10 Gen Xers feel confident about being able to afford all the things they want to do in life, compared to 82% of boomers and 77% of millennials. And more than half wish they would have saved more money for retirement even though they haven’t taken the time to put together a written financial plan to set that in motion.
“Gen Xers are starting to realize that retirement isn’t far off on the horizon,” Kelly LaVigne, vice president of Consumer Insights at Allianz Life, told Yahoo Finance. “They could have more years of working behind them than in front of them. That realization can lead to panic. This is a good time for them to start figuring out how much income they will need in retirement and how close they are to being able to fund that.”
Many intend to. Some 63% say one of their top goals in the next five years is to save enough and make plans to live a comfortable retirement, up from 56% last year.
“What’s tough for Gen Xers who are trying to ramp up retirement savings is that the market has been taking off,” LaVigne said. “So, with the market at highs, that means investing in the market is expensive. But it’s important to remember that timing the market is often a fool’s errand. For long-term goals like retirement, time in the market is one of your biggest assets.”’
Delay claiming Social Security
There are moves to make to course-correct.
A realistic plan could be “to grind out your current job as long as you can and save 25% or more per year,” Blanchett said. “Then find a different job that you enjoy, maybe part-time, that pays you enough that you can push back claiming Social Security until your full retirement age, or even age 70 when you get the highest benefit for the rest of your life,” Blanchett said.
That’s a tough sell these days. Many people start claiming Social Security benefits as soon as they possibly can — at age 62. Waiting to tap your benefits until age 70, you earn delayed retirement credits. Those come to roughly an 8% per year annual increase in your benefit for each year until you hit 70 when the credits stop accruing.
Approximately 40% of men and 47% of women claim at age 62, according to the Social Security Administration. Only 3% of men and 4% of women claim at age 70, when they get the most in benefits.
While there are certainly good personal reasons for claiming early, such as failing health or financial need, those who can push back that check will generally reap the greater reward.
Some light slipping through
Of course, the retirement scenario for 55-year-old Gen Xers is not universal, and many are well prepared for retirement. Fidelity’s first quarter analysis showed that balances for Gen X workers who have been saving for 15 years averaged $543,400, or $200 more than boomers.
In fact, Gen Xers, on average, save more of their annual pay than the recommended 15%.
Some of that uptick can be attributed to those 50 and over who are making catch-up contributions to their retirement accounts. For 2024, the catch-up contribution allowed in a 401(k) is an extra $7,500 on top of the $23,000 limit for everyone else, for a total of $30,500.
Is working longer the answer?
For many people, the default solution is to stay on the job past the traditional retirement age of 65.
“There’s this kind of assumption that if you’re 55 years old, you’ve got 10 more years to work ahead of you,” Blanchett said. “Most Americans, however, retire two or three years before they expect to do so.
“Why that’s really important is that that 10-year struggle to ramp up retirement accounts could very well be a seven-year struggle,” he said. While you can’t re-write the past, if you’re serious about your intention of making saving a priority over the next few years, then focus on a realistic plan now.
Better late than never.
