Saving for retirement can be a difficult task at many stages of life. In your 20s, you may struggle to find the money for long-term savings when you’re in the throes of paying off your student loans. In your 30s, you may be saving for a house and paying an exorbitant amount for child care just to keep your job. And in your 40s, you may be spending your money on home repairs and doing your best to fund your kids’ 529 plans so they don’t have to deal with the stress of student loans like you did .
So it’s quite easy to reach fifty without having a lot of money in retirement savings. But unfortunately, that’s the boat many Gen Xers find themselves in today.
Gen X savings need improvement
Northwestern Mutual reports that the average retirement savings balance for Gen Xers is $108,600. But given that many Gen Xers are already past 50, this is a bit problematic.
Let’s say you’re 55 years old, have $108,600 to your name, and your goal is to retire at 65. Even if you manage to save $300 per month over the next 10 years and your investments generate an average annual return of 8% (which can be an aggressive estimate because it generally requires a stock-heavy portfolio, and it’s less appropriate as you approach retirement), you are looking at a total savings of approximately $286,000.
That’s not a ton of money for what could be 20 or more years of retirement. In fact, if you were to apply the 4% rule to a balance of this size, you would get $11,440 per year in annual retirement income from savings (at least initially, since the 4% rule requires you to adjust withdrawals according to inflation). ). Given that Social Security cuts are on the horizon and the average beneficiary today only sees about $23,000 a year, you’ll probably want to save more than that.
It’s not too late to catch up
If you’re in your 50s and your retirement savings are around $108,600, you may not be in the best situation, but you’re not in the worst either. You should, however, make an effort to try to significantly increase your savings over the next decade and change, so that you can avoid financial difficulties once your career is over.
In this regard, start by evaluating your current expenses and see if it is possible to reduce them. This doesn’t necessarily mean downsizing your home. Instead, try to reduce your budget as much as possible.
If moving isn’t feasible because you still have kids in high school and don’t want to uproot them, trade in a more expensive car for a more cost-effective one. Or, instead of paying for your children to participate in sports programs during the summer, have them find a part-time job so you don’t have to spend money. Moreover, in this way, they can contribute to their education funds to take some of the pressure off you.
Next, see if it’s possible to join the gig economy. Working a side job just a few hours a week could boost your income and help you get your hands on more money for your 401(k) or IRA. And remember, a side hustle doesn’t have to mean delivering pizza or driving for a rideshare service. It may be possible to line up independent consulting work in your current field.
Finally, consider delaying retirement if you think you could use a few more years of 401(k) or IRA contributions. If you plan to finish working at age 65, consider working until age 67 or 68. Not only could this give your existing savings a boost, but, just as importantly, it will allow you to leave some of your nest egg untapped. longer. Additionally, the longer you wait to claim Social Security (until age 70), the larger the monthly benefit you can lock in.
While it’s not particularly shocking to see how much the average Gen Xer has saved for retirement, that number isn’t very reassuring. So if your savings need a boost, make it your priority now. A few key changes on your part could lead to a much more financially secure retirement.
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Here’s what the average Gen Xer has saved for retirement. The Number Might Surprise You was originally published by The Motley Fool
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