Gen X finally tops boomer 401(k) balances, but will it be enough to retire?

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 been saving for 15 years averaged $543,400, or $200 more than boomers’, according to the financial service 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 behind the boomers, who were born between 1946 and 1964 and are retiring now.

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 as 401(k)s replaced pension plans. Surveys have shown many of them don’t have nearly enough for retirement, 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’s driving 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.
• Simultaneously, Gen X is approaching retirement, so they’re more aggressively saving as much as they can.

In fact, Gen X on average saved more of their annual pay than even what Fidelity recommends. Fidelity suggests workers save 15% of their paycheck, including employer contributions, and Gen X topped that with 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 catch-up contributions, and 14.5% of Gen Xers are making catch-up contributions.”

A catch-up contribution is additional money older workers can put in their retirement plans. For 2024, the catch-up contribution is an extra $7,500 on top of the $23,000 limit for everyone else, for a total of $30,500.

Will it be enough for Gen X to retire?

Gen Xers who have consistently saved in their 401(k) plan may have a decent nest egg by the time they retire, but there are few of them, said the nonprofit research group National Institute on Retirement Security.

After examining 2020 Census Bureau data, the institute found a large discrepancy between average and median savings, with the average employer-sponsored retirement account at $173,553 and the median at $50,000. Two percent had zero balances, it 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,” the organization said.

Dan Doonan, the institute's executive director, said in a statement: “This really isn’t surprising given the terrible retirement hand that has been dealt to the latchkey generation. Most Gen Xers don’t have a pension plan, they’ve lived through multiple economic crises, wages aren’t keeping up with inflation, and costs are rising. The American Dream of retirement is going to be a nightmare for too many Gen Xers.”

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What are the retirement strategies for Gen X?

The good news is Gen X still has time. The oldest are around 58, four years from Social Security’s earliest claiming age of 62, and the youngest are in their early 40s, just beginning their prime working and earning years.

Gen X seems cognizant that retirement is near and don't plan to squander the time.

Sixty-three percent said one of their top three goals in the next five years is to save enough and make plans to live a comfortable retirement, according to Allianz Life’s 2024 Annual Retirement Study of 1,000 adults. That’s up from 56% last year.

“Saving more overall is foundational to retirement,” said Kelly LaVigne, Allianz Life vice president of consumer insights.

Some steps Gen X should take:

• Maximize retirement savings and tax-deferred opportunities, including catch-up contributions and investing money in health savings accounts (HSAs).
• Develop a plan and seek professional advice for complex finances and tax plans.
• Factor in health care, a growing expense in retirement as costs soar and people live longer.

“For Gen Xers, retirement is no longer this far-off idea,” LaVigne said. “That can feel stressful, but by preparing now, they can create a strategy that will help them seek their ideal retirement. The good news is that it is never too late to prepare for retirement. You can wish you started sooner, but you’ll never wish that you waited longer.”

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.