The Gen X Retirement Gap: Challenges, Strategies & Timely Solutions

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Generation X, defined by those born between 1965 and 1980, is rapidly approaching retirement age. At the same time, a growing body of financial data reveals this is a generation at risk of falling short.

Now in their prime earning years, Gen Xers face a perfect storm: diminished access to defined-benefit pensions, rising healthcare costs, inflationary pressures, and the impact of multiple economic downturns, including the dot-com crash, the Great Recession, and the COVID-19 pandemic. Unlike the baby boomer generation, which benefited from more robust employer-sponsored retirement plans and a less volatile economic environment, Gen X shoulders the burden of self-directed retirement savings amid increasing longevity and reduced social safety net expectations.

According to a 2023 report from the National Institute on Retirement Security,¹ the average balance for private retirement accounts among Gen X workers was just shy of $130,000. That’s not nearly enough to fund a retirement of 30 years or even longer. Many expect to rely heavily on Social Security, which itself faces future solvency questions.

According to Nationwide’s 10th Annual Advisor Authority Study,² 20% of Gen Xers believe they need at least $2 million to retire comfortably, but only 7% have reached that milestone. In fact, 30% report having less than $100,000 saved for retirement. Schroders’ 2024 U.S. Retirement Survey³ further highlights this gap, revealing that Gen Xers anticipate needing $1.07 million but expect to retire with only $602,944 — a $466,802 deficit.

Gen X is in the midst of balancing myriad financial responsibilities, including college tuition for children, aging parent care, and mortgage debt, all of which may have eroded their savings potential as well as created a critical need for targeted financial planning, investment strategy and risk-adjusted wealth management. Following are some of the issues and several strategies for a comprehensive retirement plan.

First, let's address the major issues:

Healthcare costs loom large

Healthcare is arguably Gen X’s greatest retirement concern, and not without reason. MarketWatch reports that 63% of Gen Xers fear outliving their retirement savings, driven largely by uncertainty over healthcare costs.⁴ While Medicare offers coverage starting at age 65, it does not include dental, vision, or long-term care, which could add up to hundreds of thousands of dollars over a retirement span. A Fidelity Benefits Report⁵ estimates a couple retiring today will need approximately $315,000 for healthcare expenses alone.

Caught in the sandwich generation

Gen X is often referred to as the “sandwich generation,” simultaneously supporting aging parents and dependent children. According to Corebridge Financial,⁶ these dual responsibilities are draining both emotional and financial resources, making it harder to prioritize long-term savings. Adult children living at home, skyrocketing college costs, and elder care are contributing to increased debt burdens and reduced retirement contributions. Also, as a result of this situation, many Gen Xers have paused retirement savings to help family members or pay off existing debts, stretching themselves thin at a time when compounding growth could still make a significant impact.

Lack of planning & confidence

Alarmingly, a large segment of Gen X lacks a formal retirement plan. A report from WorldatWork⁷ notes that over 50% of Gen Xers do not have confidence in their financial future, and many haven’t even calculated how much they need for retirement. The Bloomberg Retirement Report⁸ also found that Gen X trails both baby boomers and millennials in 401(k) balances, despite being closer to retirement.

The good news is that it's not too late for Gen Xers to get back on track, but now is the time to act decisively and strategically. The following are steps to take that can help in the preparation of a comfortable retirement:

Maximize retirement contributions

For those 50 and older, the IRS allows catch-up contributions of an additional $7,500 in 401(k) plans for 2025. which is a powerful tool for Gen X to close the savings gap. Contributing the maximum to 401(k)s and IRAs, especially Roth versions, allows for tax advantages and greater flexibility in retirement. By transitioning from traditional, tax-deferred accounts to Roth accounts, the investor gains the benefit of tax-free withdrawals

Reduce debt now

By reducing high-interest debt now, investors can minimize the risk of depleting their fixed retirement income later. Paying off credit card balances and refinancing mortgages frees up cash flow for retirement savings.

Delay Social Security

Delaying collection of Social Security benefits from age 62 to 70 can increase benefits up to 76%. If it is financially feasible, working a few extra years could provide both increased benefits and additional time for savings.

Diversify investments & income streams

Gen X should reconsider overly aggressive portfolios and look to balance risk with stability. Ideally, a balanced portfolio and diversified income, including annuities, part-time work, and rental income can help mitigate risk. Exploring part-time consulting, freelance work, or even “silver squatting” (shared housing) may provide creative income solutions.

Plan proactively for healthcare costs

Using Health Savings Accounts (HSAs) and researching long-term care insurance options are proactive steps that can reduce the healthcare burden later. It is critically important to have this early preparation, especially if you are planning to retire before Medicare eligibility.

Lower lifestyle expectations

Gen Xers should start by creating a new budget that reflects a more modest and sustainable way of living, cutting back on luxury or nonessential expenses. Downsizing — whether it's moving to a smaller home, relocating to a lower-cost area, or selling unused assets — can free up cash and reduce ongoing costs.

Equally important is a mindset shift: redefining retirement to focus less on material comforts and more on health, relationships and purpose. Practicing living on a projected retirement budget now can help identify and address potential challenges early. Gen Xers should also delay major purchases, like second homes or expensive travel, in favor of building long-term savings.

Hire a financial advisor

This may be the most important action a GenXer can take to prepare for retirement. A financial advisor can help navigate the complex and often uncertain path to retirement. With all the challenges Gen Xers face, strategic planning is critical.

A financial advisor provides personalized guidance on retirement savings, investment strategies, tax planning, and debt management — ensuring all pieces of the financial puzzle align. An advisor can also help to avoid costly mistakes, aid in remaining disciplined during market volatility, and assist with adjustments to plans as life circumstances change. Ultimately, working with a trusted advisor brings clarity, confidence, and a greater chance of achieving a secure and stress-free retirement.

Final thoughts

Generation X still has a critical window of opportunity to rewrite their retirement story, but time is of the essence. By facing the financial realities head-on and embracing a more disciplined, strategic approach, Gen Xers can mitigate risks and close the growing retirement gap. With the right planning, expert guidance, and a willingness to adapt lifestyle expectations, this generation can still achieve a retirement that offers stability, dignity and peace of mind.

¹ https://www.nirsonline.org/reports/genx/

² https://www.nationwide.com/financial-professionals/blog/research-learning/articles/generation-x-seeks-financial-guidance-to-meet-the-realities-of-retirement

³ https://www.schroders.com/en-us/us/individual/media-center/as-oldest-gen-xers-approach-age-60-many-are-unprepared-for-retirement-and-concerned-about-outliving-their-assets/

⁴ https://www.marketwatch.com/story/this-is-generation-xs-biggest-retirement-worry-and-its-not-money-7861035a

⁵ https://newsroom.fidelity.com/pressreleases/fidelity-investments--releases-2024-retiree-health-care-cost-estimate-as-americans-seek-clarity-arou/s/7322cc17-0b90-46c4-ba49-38d6e91c3961

⁶ https://www.corebridgefinancial.com/insights-education/genx

⁷ https://worldatwork.org/publications/workspan-daily/gen-x-retirement-is-on-the-horizon-many-won-t-be-ready

⁸ https://www.bloomberg.com/news/features/2024-12-13/can-i-afford-to-retire-gen-x-trails-baby-boomers-millennials-in-401-k-savings

Colleen Kelleher Sorrentino, CFA is the Managing Director of Kelleher Financial Advisors, LLC. Stacey P. Mankoff is the Managing Principal of The Mankoff Company, LLC.

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