You'd think Gen Xers would have retirement planning down to a science. After all, those in their late 30s to early 50s have been warned to save for retirement their entire careers. But a surprising number of Gen Xers are coming late to the party. Nearly a quarter of Gen X workers have yet to start saving for retirement, according to Transamerica.

Why do so many people in this age group struggle to save? Often, it boils down to rising living costs. Expenses tend to peak once workers reach their late 30s or 40s, and 40-somethings have higher credit card balances than any other age group. Still, Gen Xers who have neglected retirement planning thus far need to change their ways while there's still time. Here how.

Smiling man in polo shirt

Image source: Getty Images.

1. Start ramping up your retirement plan contributions

Whether you've been contributing minimally to your retirement plan or have yet to open one, it's time to immediately start ramping up. Currently, workers under 50 can contribute up to $18,000 a year to a 401(k), and $5,500 a year to an IRA. If you're 50 or older, you get a catch-up provision that raises these limits to $24,000 and $6,500, respectively. Also note that come 2018, 401(k) limits are increasing by $500, which means you'll get the option to contribute up to $18,500 or $24,500, depending on your age. (IRA limits are staying the same.)

Of course, maxing out an IRA is easier than doing so for a 401(k). But if you do your best and save consistently, you don't necessarily need to set aside $18,000 a year to retire comfortably. Let's assume you're able to save $4,800 a year, or $400 a month. Here's what your ending balance might look like, depending on how soon you start putting that money away:

If You Start Saving $400 a Month at Age:

Here's What You'll Have by Age 67 (Assumes a 7% Avg. Annual Return):









Chart and calculations by author.

Clearly, younger Gen Xers are at an advantage in that they have more time for compounding to work its magic. Case in point: A 37-year-old who starts saving $400 a month today stands to retire fairly comfortably with $453,000. Therefore, if you're at the older end of the Gen X spectrum, you'll need to fund your retirement plan at a higher rate to make up for your more limited savings window.

2. Choose the right investment strategy

The majority of Americans invest too conservatively for retirement, and that can put their golden years at risk. Though contributing to an IRA or 401(k) is a crucial first step on the road to a financially healthy retirement, you'll also need to be smart about your investment strategy. For the most part, this means putting the bulk of your portfolio into stocks.

Simply put, investing in stocks is one of the most effective ways to generate higher returns without taking on an excessive amount of risk. If you're in your late 30s, 40s, or early 50s, you should ideally have anywhere from 65% to 80% of your portfolio in stocks, with your remaining assets divvied up between bonds and cash. The reason? At this point in your life, you have plenty of time to ride out the stock market's ups and downs, and if you leave your investments alone between now and retirement, you're more likely than not to come out ahead.

On the other hand, if you stick to safer investments with minimal returns, you'll wind up with a lot less money in retirement, as the following table illustrates:

Portfolio Makeup

Avg. Annual Investment Return

Total Accumulated Over 30 Years (Assumes a $400 Monthly Investment)




Mostly bonds



Stocks and bonds



Mostly stocks



Chart and calculations by author.

What you need to realize about the above figures is that they're all coming from the same out-of-pocket cost of $144,000. The question is this: Would you rather see a $23,000 gain over the course of 30 years, or a $309,000 gain? If the latter sounds more appealing (which it obviously should), then you'll need a stock-focused strategy.

3. Work on eliminating debt

Though you can build a sizable nest egg by saving money and investing it smartly, that cash will only get you so far in retirement if you're carrying a load of debt with you. Entering retirement saddled with debt is a dangerous thing because once you move over to a fixed income, you'll have limited options for paying it off. A much safer move is to get out of debt before you retire and use your savings to cover your future costs -- not your past bills.

The best way to go about the process is to examine your various sources of debt and figure out which are the most costly. If you owe $10,000 on a credit card charging 20% interest, you'll want to tackle that balance before moving on to things like your mortgage and student loans. Once you've paid off your more expensive and least tax-efficient debts, work your way down the line. While it's a good idea to pay off your mortgage before retirement, remember that the interest you pay on it is tax-deductible. While student loan interest is also deductible, that benefit disappears at certain income levels, so it often makes sense to pay off your college debt and then attempt those extra payments on your mortgage.

Finally, make a point of avoiding new debt going forward, especially if it's non-essential. And resist the urge to take out student loans on your kids' behalf. While it is a nice thing to do for your children, it could end up putting your retirement at risk.

As a Gen Xer, you probably have anywhere from 15 to 30 or more working years ahead of you, so be sure to make the most of them. If you prioritize your savings, invest wisely, and wipe out your debts, you'll be putting yourself in the best position to retire comfortably when the time comes.