Gen Xers are between the ages of 45 and 60, with the oldest of them next in line to ride the retirement train while the youngest are still trying to save for kids’ college life goals and their own retirement.
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How much of their paycheck should the average Gen Xer realistically aim to save in 2026, given their goals, current inflation and cost pressures?
While there are plenty of “rules” for saving, according to Jay Zigmont, CFP and founder of Childfree Trust, any general rule about saving doesn’t consider the reality of each person’s situation.
“The goal should be to save as much as possible,” he said.
While that can vary from person to person, keep in mind that if you are in debt, paying that off should be priority. Once you are out of debt, the next goal is to build an emergency fund of three to six months of expenses. After that, the next goal is to max out your 401(k) accounts, or at least get the employer match.
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Jessie Nino, a financial advisor with Edward Jones, said she prefers to stick to “some universal fundamentals” including always prioritizing putting money into a workplace retirement plan where there’s a match — because that’s free money, for one. For two, partnering with a professional financial advisor “can provide you with the customized advice that so many people crave in this increasingly automated world.”
The biggest mistake Gen Xers may be making “is either mindlessly saving or mindlessly spending,” Zigmont said. If you are saving money, you should have a goal and invest appropriately. It is possible to save either too little or too much if you don’t know what your goals are.
“For some people, retirement is their primary goal, yet for others it isn’t as much of a focus. The key is to set a plan and follow it,” he said.
While there is no one-size-fits-all approach to savings vehicles, Zigmont suggested that Gen Xers be sure to have either a 401(k) or IRA, to take advantage of tax savings and receive employer matching funds.
Nino pointed out that if you qualify for saving money in a Roth IRA that money grows tax-free, “you don’t even claim it as income in retirement.”
A health savings account (HSA) is even more powerful at maximizing your dollars, by offering triple the tax benefits, Nino said. HSA money goes in tax-free, grows tax-deferred and if you use it for qualifying expenses, comes out tax-free again. It also never expires, so you can carry those funds into retirement even if you leave your job, and pull them out after age 65 for non-health related costs without penalty. Better still, you’re not obligated to pay back the expenses right away, so the growth can continue to compound before you pay back the expense in the future.
