Americans in their 40s and 50s are catching up with their retirement savings — can they win the race against the clock?

Americans in their 40s and 50s are waking up to the rough reality that they’re behind on retirement savings — but is it too late to catch up? After decades of financial missteps, market crashes and mounting debt, Gen X is scrambling to make up for lost time. Recent data from Fidelity shows they’re making progress, but with retirement looming, the big question remains: Will it be enough to secure their golden years, or are they headed for a rude awakening? Gen X has faced unique challenges that slowed down — or outright stalled — their retirement savings efforts. Many entered the workforce during the recessionary periods of the early 1990s, and the financial crisis of 2008 hurt their ability to save consistently. Then came student loan debt, mortgages and rising costs of living to further drain their wallets and force many to play catch-up with their retirement savings later in life. The good news from Fidelity suggests Gen X is finally making headway, with their average 401(k) balance reaching a new high and many now contributing more aggressively to their retirement accounts.

Breaking down the data

Fidelity says the average 401(k) balance for retirement savers is now at its third-highest level ever recorded, driven by increased contributions and market gains. The average 401(k) balance for Gen X, in particular, has seen substantial growth. Gen Xers who’ve been saving for 15 years saw their account averages rise to $554,000 in the second quarter of 2024, up from $543,400 in the previous quarter. Individual retirement accounts (IRAs) have also seen a boost. Fidelity reports the average IRA balance for Gen X has increased, with many taking advantage of catch-up contributions, which allow individuals aged 50 and older to contribute an additional $1,000 annually to their IRAs.

Too little too late?

Still, plenty of Gen Xers remain worried over whether they’re saving enough. A survey by Northwestern Mutual in April found that less than half of Gen Xers feel they’ll be financially prepared for retirement. Northwestern’s data also revealed the generation believes it will need $1.56 million to retire comfortably, but Gen Xers also give themselves a 42% chance of outliving their current savings. No two retirement plans are the same, meaning a Gen Xer’s ability to truly catch up depends on their retirement goals. But it’s not too late to build the kind of cushion that can make one’s golden years comfortable. One of the first steps is taking full advantage of catch-up contributions to their retirement accounts. For 401(k) plans, individuals aged 50 and older can contribute an additional $7,500 annually, on top of the standard contribution limit. Similarly, those with IRAs can contribute an extra $1,000 per year. These catch-up contributions can significantly boost retirement savings over time. It’s probably also time to consider a more aggressive investment strategy, by diversifying your portfolio and focusing on growth-oriented investments to maximize returns and start catching up. Remember, this strategy should be revisited as retirement approaches in order to protect assets. Reducing or eliminating is crucial for freeing up more money to save for retirement. High-interest debt, such as credit card balances, should be prioritized for repayment. Additionally, paying off mortgages or other large debts before retirement can significantly reduce monthly expenses and improve cash flow in retirement. Finally, seeking professional financial advice is a smart way to get, and stay, on track. A financial advisor can help create a personalized retirement strategy that accounts for individual goals, risk tolerance and time horizon.