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Get serious about saving

Gen Xers have had a rough road, so it's no surprise they're staring down savings shortfalls. For one thing, they started investing later in life than younger generations. A later start means less time for compound growth to work.

Their working years were also rocked by the dot-com bubble, the 2008 financial crisis, COVID-19, and post-pandemic inflation, which 41% of GenXers say is killing their retirement dreams, according to a Natixis Global Survey.

While these obstacles may explain low savings rates, they don't change the reality that a retirement nest egg isn't optional.

If you've started your 10-year countdown, you have no choice but to get serious, make a budget prioritizing savings, and automate the savings process. To do that, you can use the calculators on Investor.gov to set a savings goal. A popular rule of thumb says you should have a nest egg equal to 10 times your final salary when you retire. Budget around that number, making changes as required. This could mean drastic shifts, like switching to a cheaper vehicle or picking up a side hustle.

Once the numbers work, set up automatic contributions to a 401(k) or IRA to ensure the amount you need is invested before you get paid so saving is no longer optional but happens automatically every month before you do anything else.

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Catch up with catch-up contributions

Uncle Sam has your back when it comes to catching up on retirement savings as Americans 50 and over are eligible to make catch-up contributions. These are extra tax-advantaged contributions to 401(k) and IRA retirement plans.

In 2024, the 401(k) contribution limit is $23,000 and the IRA contribution limit is $7,000. However, those 50 and over can make extra catch-up contributions of $7,500 to their 401(k) and $1,000 to their IRA. Aim to get as close as possible to maxing out these accounts -- especially a 401(k) if your employer offers matching contributions.

Investing $30,500 annually in a 401(k) over a decade would leave you with almost half-a-million dollars without even adding in matching funds, assuming a 10% return. That provides a whole lot more financial security than an account with $50,000 or less.

Of course not everyone can max out these accounts, but working to get as close as you can will make all the difference.

Choose the right investments

Finally, choose a mix of investments that allows you to avoid excess risk while still earning reasonable returns. A good rule of thumb is to subtract your age from 110 to determine the percentage of your portfolio to put into equities. A 55-year-old should have at least 55% of their portfolio in the market under this rule.

Be careful about the investments you select, though, because if you're already behind on retirement savings, you can't afford to let high fees eat away at your returns. Broadly diversified, low-cost index funds, like those tracking the performance of the S&P 500, are a good bet to help you earn consistent returns over a long period.

Following these steps can help you overcome any savings shortfall so a decade from now, you won't be wondering if leaving the workforce is something that can ever happen for you.


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Christy Bieber Freelance Writer

Christy Bieber a freelance contributor to Moneywise, who has been writing professionally since 2008. She writes about everything related to money management and has been published by NY Post, Fox Business, USA Today, Forbes Advisor, Credible, Credit Karma, and more. She has a JD from UCLA School of Law and a BA in English Media and Communications from the University of Rochester.


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