Gen X Increasing 401(k) Investments: The Importance of Retirement Planning

With retirement approaching for some Generation X workers (those born between 1965 and 1980), a significant trend has emerged — an increase in 401(k) contributions. 

Bloomberg recently reported that Fidelity’s 401(k) contributions were up 30% in 2024, increasing the number of millionaires across the country. As more of this generation enters their 40s and 50s, they’re realizing the urgency of securing their financial future, spurred by economic uncertainties, rising living costs, and a longer expected lifespan. 

This heightened focus on retirement planning has ignited discussions across social platforms, where Gen X professionals are sharing insights about increasing their 401(k) investments. Here’s why it matters and how not only Gen X, but everyone, should play an active role in their retirement planning. 

The Retirement Reality for Gen X

Unlike previous generations, Gen X faces unique challenges in retirement planning. Many were hit hard by the 2008 financial crisis and are often sandwiched between supporting both aging parents and their adult children. As a result, this generation may feel they’re playing catch-up when it comes to building a substantial retirement fund. The rise in 401(k) investments reflects their recognition of this reality and a proactive approach to closing the retirement gap. 

For those in their 40s and 50s, the time to build a robust retirement portfolio is now, and increasing contributions to tax-advantaged accounts like a 401(k) is one of the most effective ways to grow savings.

Why a 401(k) Is a Powerful Tool

One reason Gen Xers are turning to their 401(k) plans is the range of benefits these accounts offer. This type of fund allows individuals to invest pre-tax income, reducing taxable earnings while providing long-term growth potential through compound interest. 

Additionally, many employers match contributions, effectively giving employees "free money" toward their retirement savings. As more companies offer automatic enrollment and increase matching percentages, those who have the ability to contribute to their future well-being and retirement should. In an era where pensions are rare, the 401(k) remains one of the most reliable pillars of retirement security.

The Power of Starting Early… Or Catching Up

Retirement planning is most effective when started early, but that doesn’t mean it's too late for anyone. In fact, for the year 2024, for those in their 50s, the IRS allows catch-up contribution enabling individuals to contribute an extra $7,500 annually to their 401(k) in addition to the standard $23,000 limit. 

This extra investment can make a significant difference, helping late savers bridge any gaps in their retirement savings goals. Compound interest rewards time, and even boosting contributions for just a decade can lead to substantial growth in a retirement portfolio.

Balancing Today’s Needs with Tomorrow’s Goals

While contributing more money to a 401(k) is essential, it’s also important to strike a balance between current financial obligations and future goals. Many in Gen X, and even Millennials, are juggling mortgages, education costs for their children, and healthcare expenses for aging parents. However, failing to prioritize retirement can leave them financially vulnerable later in life. By increasing your 401(k) contributions now, you’re  investing in your future independence, ensuring you won’t need to rely heavily on others or social programs if you ever stop working. 

Professional Advice is Key

For those unsure of how to navigate the complexities of retirement planning, seeking professional financial advice can be invaluable. A financial planner can help you create personalized retirement strategies, maximize employer matches, and ensure that their portfolios are properly diversified to withstand market fluctuations. Additionally, advisors can help identify other savings vehicles, like IRAs or investment accounts, that complement 401(k) savings. The key is crafting a retirement plan that aligns with individual goals and timelines.

Justworks can Help Employers Provide the Best Benefits

Partnering with Justworks can simplify the process of offering competitive benefits like 401(k) plans to your employees. We take care of the administrative burden, ensuring compliance with applicable regulations and providing access to top-tier benefit options. This allows you to attract and retain top talent, no matter where your team is based, while focusing on growing your business. 

Let us help you create a stronger, more satisfied workforce by optimizing your benefits offerings. Get started today to see how we can help you build a happier and more prepared workforce.