Retirement Planning Advice for Gen X

Generation X, those born between 1965 and 1980, are now entering a critical stage of their financial lives. According to U.S. Census Bureau estimates, Gen X numbered approximately 65.2 million as of July 1, 2019, and is expected to surpass the Baby Boomers in population by 2028. With retirement on the horizon, it is time for Gen Xers to take their retirement planning seriously.

Often referred to as the “sandwich generation”, this generation has faced unique challenges. Positioned between the more traditional Baby Boomers and the digitally savvy Millennials, Gen X has witnessed rapid shifts in technology, the workplace, and the economy. They also got to witness the dotcom bubble, the Great Recession, the COVID-19 pandemic, as well as grievous events like 9/11. These pressures have made it even more important for Gen Xers to create a solid retirement strategy.

If you are part of Gen X, now is the time to reassess your goals and take control of your future. You can work with a financial advisor to get things done the right way. You can also read this article to learn some helpful Generation X retirement planning strategies specifically tailored to your needs.

What is the best retirement advice for Gen X?

     1. Plan for healthcare and do not underestimate it

Healthcare planning is easily one of the most essential parts of preparing for retirement. Healthcare is not what it used to be, especially if you are part of Generation X. You probably remember a time when healthcare felt relatively affordable, especially if you had a decent job. Your parents might not have spent a ton on premiums, and chances are, you did not think too much about it in your 20s or 30s.

But now? Things have changed. Big time.

Today, healthcare costs are soaring. For a family, annual health insurance premiums can hit upwards of $33,000 a year. And this probably does not include out-of-pocket expenses, prescription drugs, and dental costs. Gen X, unfortunately, is stuck between rising healthcare costs and the uncomfortable reality that, on average, they are not as healthy as their parents were at this age.

And that is exactly why you need to plan for healthcare now and not later.

Sure, you might already have health insurance through your job or your spouse’s. But that is most likely not enough. As you get closer to retirement, one major thing to consider is long-term care insurance. This can help you protect your savings from the cost of nursing homes, assisted living, and more. The ideal time to buy long-term care insurance is in your 50s or early 60s. That is when premiums are still somewhat reasonable, and more importantly, you are less likely to get denied due to a health condition. Waiting too long can either make it too expensive for you to purchase or completely inaccessible if you do not qualify for it on the grounds of poor health. And if you retire without it, you could drain your savings far faster than you imagined. And let’s be real, you probably do not want to become financially dependent on your kids, especially when Millennials and Gen Z are already dealing with their own financial challenges. You can talk to a financial advisor about how much you should be saving and what kind of coverage makes sense for you.

You can also speak to a retirement planner for Generation X about using a Health Savings Account (HSA). You can contribute to an HSA with pre-tax dollars. This money grows tax-free, and the withdrawals made for qualified medical expenses are exempt from tax. You get to enjoy triple tax advantages, which translate to fewer tax headaches.

     2. Catch up with your catch-up contributions to accounts like the 401(k) and the IRA

If you are part of Generation X, you are likely in your 50s, which makes you officially eligible for catch-up contributions to retirement accounts like the employer-sponsored 401(k) plan and the self-funded Individual Retirement Account (IRA).

This is one opportunity you do not want to miss.

Catch-up contributions are basically the government’s way of giving you a chance to build your retirement savings faster. So, if you feel like you have not saved enough or just want to beef up your nest egg while you can, this is your window.

Here’s how much you can contribute to different accounts in 2025:

• IRA: In 2025, you can contribute up to $7,000 per year to a Roth IRA. But if you are 50 or older, you can throw in an extra $1,000, bringing your total contribution to $8,000 for the year.
• 401(k): Now, if you are also contributing to a 401(k), the standard limit for 2025 is $23,500. But thanks to the catch-up provision, you can add another $7,500, making your total potential contribution a whopping $31,000. If you are between the ages of 60 and 63, you can invest up to $11,250. So, you can continue making higher contributions in the coming years, too.
• 403(b), government 457 plan, or Thrift Savings Plan (TSP): These accounts have the same contribution limits as the 401(k).

Now, while these may just seem like numbers, let’s break it down to what they actually mean if you contribute up to these limits:

Let’s say you are 50 now, and you continue contributing at that rate for the next 10 years. You could invest $8,000 annually in an IRA and $31,000 in your 401(k) or other similar accounts. That brings your total investment to $39,000 per year or $390,000 over a decade. And if your spouse does the same? That is $780,000 in contributions alone. This is before counting investment growth or tax savings. Moreover, since the general Generation X retirement age is between 62 and 67, you can keep contributing well into your 60s. If you contribute between the years 60 and 63, you and your spouse can contribute $34,750 each annually. That’s an additional $139,000 per person over those four years. Together, you are looking at $1,058,000 in contributions.

Plus, you get to enjoy the tax benefits. With your 401(k), you are deferring taxes on your contributions, which lowers your taxable income for the current year. With a Roth IRA, your money grows tax-free, and you will not owe a penny on withdrawals in retirement. So, do not brush this off and start taking advantage of these contributions.

     3. Get your debt situation under control before you reach the end of your career

Gen X is carrying more debt than any other generation. If you are in this age group, this probably does not surprise you. Between student loans, both yours and your kids’ house mortgages, car payments, and high-interest credit cards, you may have or still be struggling with debt. But you can’t afford to take debt into retirement with you.

You have already weathered a lot, from the Great Recession to the COVID-19 pandemic. You may have dealt with job losses, forced sabbaticals, market crashes, caregiving responsibilities for aging parents, and the rising costs of raising children. It is no wonder that many Gen Xers have turned to debt just to keep up. Still, now is the time to get serious. If you are within 10 to 15 years of retirement or even closer, you need a strategy to tackle that debt now. If you are still paying off a mortgage, credit cards, or loans by the time you retire, it is going to eat into not only your income but also your peace of mind.

So, where do you start?

First, get clear on how much you owe. Make a list of every outstanding balance. This includes mortgages, car loans, credit cards, student loans, and basically everything else. You must also add interest rates and minimum monthly payments for each of these debts.

Then, you need to decide on your strategy. You have got two popular debt repayment methods to choose from:

• The snowball method: If you choose this option, you need to pay off the smallest debt first, regardless of interest rate. This can help you get rid of your debts quickly. This method can also motivate you to speed up the process of debt reduction, as the small wins can help you stay on course.
• The avalanche method: If you choose this method, you need to start with the debt that has the highest interest rate first. This helps you get rid of a significant chunk of your debt first. This way, even if you have to retire with some debt, in the worst-case scenario, you would have smaller obligations that can be managed with your retirement savings.

Both methods work. It just depends on what motivates you more. Your financial situation will also help you determine a better course of action. It is also essential to avoid taking on new debt close to your retirement. The biggest dilemma that Gen X may face is co-signing loans for their children. While you may think this is worth considering, you need to take a realistic view of your finances and then make a call.

     4. Understand your annual expenses and make sure your savings are on track to support you in retirement

Another important step in the Generation X retirement planning task list is understanding your annual expenses. You may not know what life will look like in retirement, but you can get a pretty good estimate if you start by looking at your current spending.

You can start with the basics and consider things like:

• How much are you spending right now on essentials? That includes groceries, utilities, gas, insurance premiums, home maintenance, and other everyday items. Write it all down.
• Then, add healthcare, which, for Gen X, is a biggie. Insurance premiums alone could run into thousands of dollars per person per year. If you are covering a spouse or dependents, consider those, too. Do not forget to buy long-term care insurance, which is wise to purchase before retirement.
• Next, look at your wants. Think about how you would like to spend your time when you retire. Will you be traveling? Hitting the golf course? Dining out more often? Visiting grandkids across the country?
• Once you have mapped out your expected expenses, take a hard look at your savings. Are you on track? Will your 401(k), IRA, Roth IRA, and other retirement accounts be enough to cover your projected costs?

If the answer is no, or even “I’m not sure”, there are ways to close the gap.

As talked about earlier, you can boost your savings through catch-up contributions. In 2025, that means putting up $8,000 annually to an IRA and $31,000 or $34,750 to a 401(k).

You might also consider other strategies like:

• Cutting back on unnecessary expenses
• Downsizing your home
• Relocating to a place with a lower cost of living

Also, consider using tools like retirement calculators to gauge how much you will need based on factors like Generation X retirement age, lifestyle, income, inflation, etc.

Knowing the exact numbers helps you understand where you stand, what you lack, and what you need to do.

So, what are your key takeaways?

• Catch up on your contributions: This is your prime time to take full advantage of retirement accounts. So, do not miss this golden opportunity.
• Know your expenses, especially healthcare: Take a hard look at what you are spending on essentials like utilities, gas, groceries, and insurance. But pay close attention to healthcare costs, which can skyrocket in retirement.
• Get a handle on your debt: Carrying debt into retirement can strain your cash flow. Use strategies like snowball or avalanche methods to get started.
• Use the right tools: Retirement calculators and planning apps can help you reach your goals sooner as they provide clear insights.
• Do not go it alone: A certified retirement planner for Generation X can help you understand your options and build a suitable strategy. Our free advisor match tool can help you here.