New York City has a population of about a fifth of the nation's population, which is now in their 40s and 50s. As the next generation in line to retire behind the Baby Boomers, their experience may be a cautionary tale for those coming up behind them.
The average Gen X retiree savings balance suggests that many higher earners may not be saving enough, if those savings are intended to be one's main source of income in retirement. The social security benefits for high earners are intended to replace only a quarter to a third of their income if they retire at a full retirement age, which is 67 for Gen Xers.
While some social security benefits may ultimately be reduced because lawmakers have yet to address the program's long-term solvency, it's worth remembering that it's possible to lower social security benefits for some. In reality, by 2034, Social Security will only be able to pay 80% of the promised benefits, which is when Gen Xers will start retirement.
Many are far off recommended marks.
Setting benchmark goals can be challenging since each person's situation is different and may change over time for better or worse. By 45, a broad recommendation suggests that one should have saved two to four times one's household income; three to six times by age 50 and four-and-a-half to eight times by 55.
If a person retires at age 50, their marital status, where and how it plans to live, whether they will have a steady monthly income from a pension, how much can they expect from Social Security and how much can come from other potential income sources, such as part-time work or a rental property, depending on how much is saved if they aren't able to live for a long period of time?
In retirement, assess where you stand: figure out what likely sources of income and income-generating assets will be available to you. With your earnings to date, you can request a benefits estimate here to determine what Social Security may pay you based on your earnings to date. You can use calculators online to assess if you're on track to have sufficient savings in retirement, including Fidelity, Vanguard or T Rowe Price.
If you can afford it, you may also receive helpful advice, from a fee-only certified financial Planner or a financial adviser who has a declared fiduciary responsibility to serve your interests only and who is not paid a commission to put clients' money into specific investment products. If your employer offers free or subsidized financial coaching, check to see if your provider offers free or subsidized financial coaching.
With automatic deductions from their paychecks, many people take the auto IRA contribution method, which provides an easy, tax-advantaged way to save and invest for retirement. Some employers may be able to make contributions to their employees' accounts, but others are not.
Also, changes to an existing saver's Credit may lower income Gen Xers' income. Credit will become a saver's match beginning in 2027 and, significantly, it will become refundable, meaning a tax filer will not have to have a tax liability in order to claim the match. The match will be deposited directly into the filer's retirement plan account, allowing him to equal 50 percent of a tax filer's contribution, up to a maximum match of $2,000.