weather icon Mostly Cloudy

What Gen Xers can do about their financial squeeze

According to a Schwab Retirement Plan Services’ survey of 1,000 401(k) plan participants, 42% of Gen Xers are more focused on paying off debt than saving for retirement.

“For Gen X, the runway to retirement is getting shorter. So if they aren’t saving now, it will be even more difficult to catch up in their 60s,” said Nathan Voris, managing director of business strategy for Schwab Retirement Plan Services. “While we understand the pressures of paying off debt, Gen Xers need to make saving for retirement a top priority as well.”

How to do both

Even if you’re focused on paying off debt, Voris said Gen X should still be contributing to their retirement savings — even if it’s only a small amount.

“At a minimum, Gen Xers should be contributing enough to their 401(k) to get any matching dollars available from their employers,” he said. “Passing up the match is like leaving money on the table.”

Related: Baby boomers, gen x or millennials — who really had it worst?

Unanticipated expenses are Gen X’sbiggest financial obstacle

Schwab asked its 401(k) participants the factors that are preventing them from saving more for retirement. Gen X named unexpected expenses like home repairs as the No. 1 obstacle, with 38% saying this is one of their top barriers. The other top obstacles are credit card debt (31%) and needing money for monthly bills (29%).

How to prioritize financial obligations

Knowing how much to contribute to each financial obligation can be tricky.

“For Gen X, and all generations for that matter, retirement should be a top saving priority,” Voris said. “If money is tight, contribute at least enough to get any company match available in your 401(k). Then it’s time to tackle high-interest credit card debt before you focus on establishing an emergency savings fund.”

When you’re financially able to contribute to an emergency fund, Voris said to aim to have at least three months of living expenses saved.

“It can sound pretty daunting, but every step, no matter how small, is a step in the right direction,” he said.

Over one-fifth of Gen X is paying for their children’s education

In addition to covering the necessities — unexpected expenses, credit card debt and monthly bills — 22% of Gen X is paying for their children’s education or tuition.

Why this can be a bad idea

Gen Xers might want to help their kids pay for college, but they should first consider the impact it has on their retirement goals, Voris said.

“They need to keep focused on their retirement savings even as college looms, because while there are plenty of options to help finance college, that’s not the case when it comes to funding your retirement,” he said.

Take Control of your finances: The ultimate financial planning guide

Retirement is stressing Gen X out

Saving for retirement is the top source of money-related stress for Gen X, with 40% saying this stresses them out, according to the survey.

How to stress less about saving for retirement

If you’re a Gen Xer who’s feeling overwhelmed about saving for retirement, clearly you’re not alone. But there are things you can do to alleviate this stress.

“There are concrete steps that members of Gen X can take to address some of their financial burdens and money stress while still making space for retirement savings,” Voris said. “Much of this comes down to prioritizing, asking for help and getting a solid plan in place. Many 401(k) plans offer some form of personalized financial advice that can help you not just with retirement planning, but with a more holistic approach to your finances as well.”

Credit card debt is another major money stress

After saving for retirement, credit card debt is the biggest money-related stress for Gen Xers. Twenty-seven percent said this is a top stressor for them, likely because this generation is heavily reliant on credit cards — and with good reason.

“Gen X is literally caught in the middle, with many caring for both children and elderly parents,” Voris said. “Between tuition payments, eldercare expenses and out-of-the-blue costs like home repairs, it’s not surprising that many Gen Xers are relying on credit to deal with these challenges.”

This isn’t always a bad idea, but it can be risky.

“Using credit to bridge gaps can be the right choice in some situations,” Voris said. “The risk comes when credit card debt keeps building without a plan to keep it in check and under control.”

How to pay down credit card debt

Paying down credit card debt — and eliminating it entirely — can be daunting, but it’s certainly not impossible.

“As with all things personal finance, having a strategy is the best place to start,” Voris said. “For many folks, that simply begins with being aware of your card activity, and, of course, reducing unnecessary spending on the cards wherever possible.”

Next, come up with a repayment plan.

“In terms of payments, prioritize cards with the highest interest or other fees attached,” he said. “Try allocating money from other lower-priority areas to pay at least some of the principal down as well as the interest each month. There may also be other card providers willing to do a balance transfer and offer a lower interest rate. But do your research or seek guidance on that kind of move first.”

Nearly a quarter of Gen X is stressed about living expenses

Keeping up with monthly expenses is another top money stress for Gen X, with 23% saying this is a stress for them. Voris said a major factor in this is Gen X’s role as the “sandwich generation,” the generation that’s financially taking care of parents and children at the same time.

“They are burdened by debt and trying to save for the future but bogged down by competing financial obligations in the present,” he said. “Are some members of Gen X living beyond their means? There’s a portion of people in every generation that live beyond their means. But for many Gen Xers, they are juggling multiple financial pressures that are causing them stress.”

What to do when you feel overwhelmed by money stress

There’s no shame in getting professional advice if you’re struggling to balance multiple financial obligations at once.

“We always encourage people to ask for help so they can build a financial plan that makes retirement a priority, while helping to tackle the competing financial burdens that Gen Xers, in particular, need to balance,” Voris said.

Many Gen Xers who struggle do still contribute to retirement savings

The survey found that the average Gen Xer contributed $9,499 to their 401(k) in 2018 — but is that enough?

“If you can find the resources, it makes sense to max out your 401(k),” Voris said. “The 2019 contribution limit is set at $19,000, but those aged 50 and above can contribute an additional $6,000 in catch-up contributions. For 2020, the limits will rise to $19,500 and $6,500, respectively. And even if you can’t save that much, try to increase your savings rate each year by at least 1% or 2%. Those small increases can add up over time.”

Contributing Just the Matched Amount Is Likely Not Enough To Retire Comfortably

Voris said everyone should at minimum be contributing whatever matched dollars their company offers, but this probably won’t be enough to retire on.

“Many companies set their matches around 3% to 6% of your salary, and contributing only up to that amount likely won’t get anyone to their long-term goals,” he said. “That’s especially true if you don’t start saving until your 40s. It’s important to remember that when investing for retirement, thanks to compound interest, the longer money is invested, the more time it has for potential growth. If you start investing at a younger age, you’ll likely be fine saving a lower percentage of your salary — say 10% to 15% — but if you wait until your 40s, you’ll need to be much more diligent.”

Get started: 20 ways to save money fast

The financial squeeze is leading some Gen Xers to take out 401(k) loans

Although many Gen Xers are contributing to 401(k) plans, not everyone is treating it as a long-term savings vehicle. The Schwab survey found that 31% of Gen Xers have taken a loan from their 401(k), and more than half of those borrowers (61%) have done so more than once.

Why 401(k) loans can be a bad idea

If you take out a 401(k) loan, it might seem necessary at the time. But it’s important to weigh the positives and negatives first.

“Generally speaking, borrowing from a 401(k) should be a last resort because there can be long-term financial consequences in doing so,” Voris said. “Many borrowers who have an outstanding 401(k) loan stop contributing to their 401(k), which sets back their savings efforts. There are also tax implications to consider; 401(k) loans are repaid with after-tax money, which is then taxed again when the money is withdrawn in retirement.”

It also puts you at financial risk if you part ways with your employer.

“Typically, if the borrower leaves or is let go from their job, they will have to pay the loan back within a few months or pay income tax, and likely a 10% penalty on the remaining loan balance,” Voris said.

When taking out a 401(k) loan makes sense

Although 401(k) loans should be a last resort, Voris said that taking one out is sometimes warranted.

“There are instances in which taking a 401(k) loan would make sense, such as being in serious financial need, paying down high-interest debt or making a down payment on a home when there are no other financial resources to pull money from,” he said. “One of the advantages of borrowing from your own 401(k) account is that it’s a much simpler process than applying for an external loan. In addition, when paying it back, you are paying the principal and interest on the loan to your own account.”

“If you do borrow from your 401(k), it’s important to have a solid plan in place for paying back the loan in a timely way to mitigate the potential negative consequences,” Voris said.

How Gen X can overcome the financial squeeze

Gen X faces burdens that other generations do not.

“Gen X is aptly named the ‘sandwich generation’ because they, more than baby boomers and millennials, are facing the time in their lives when they may be providing financial support for their children as well as aging parents,” Voris said.

These obligations come on top of the need to pay off debt, save for retirement and manage everyday expenses, too. Fortunately, there are steps this generation can take to help tackle their financial issues:

Contribute at least the matched amount to a company 401(k)

Pay down high-interest credit card debt

Save three months of living expenses in an emergency fund

Increase retirement contributions as you’re able

And, as Voris said, working with a professional to build a financial plan can help alleviate money stress and keep you on track toward meeting money goals.

More from GOBankingRates

24 ways to make this week’s paycheck go further

Here’s how much cash you need stashed if an emergency happens

100 ways to make money without a 9-to-5

21 smartest ways to invest your money right now

This article originally appeared on GOBankingRates.com: Why Gen Xers are feeling the ‘financial squeeze’ — and what to do about it

Don't miss the big stories. Like us on Facebook.
Entertainment Videos
Las Vegas performers adapt to pandemic restrictions - Video
The coronavirus pandemic has forced creative people in Las Vegas, a city that thrives on live performance, to adapt to new or changed ways to entertain. (Rachel Aston/Las Vegas Review-Journal)
Las Vegas woman brings Blue Angel to life - Video
When Las Vegas shut down during the coronavirus pandemic, Victoria Hogan created the Blue Angel costume and performance, emulating the statue locals know and love in order to connect with others in a time when connection isn’t as possible. (Rachel Aston/Las Vegas Review-Journal)
‘Hamilton’ postponed as Smith Center remains dark indefinitely - VIDEO
The hit musical 'Hamilton' was supposed to run from September through October at The Smith Center’s Reynolds Hall has been postponed due to the COVID-19 pandemic. (Las Vegas Review-Journal)
ZZ Top frontman Billy Gibbons rides a bicycle on the Strip with Kats
Las Vegas resident and ZZ Top frontman Billy Gibbons rides down the Strip with his wife Gilligan Stillwater GIbbons and Las Vegas Review-Journal columnist John Katsilometes Wednesday, May 20, 2020. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
ZZ Top frontman Billy Gibbons rides a bicycle on the Las Vegas Strip with Kats - Video
Las Vegas resident and ZZ Top frontman Billy Gibbons rides down the Strip with his wife, Gilligan Stillwater Gibbons, and Las Vegas Review-Journal columnist John Katsilometes on Wednesday, May 20, 2020. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Ex-WWE star Shad Gaspard found dead on beach - Video
Shad Gaspard, 39, the former WWE wrestler, was found dead Wednesday morning on the shoreline of Venice Beach in California. Gaspard went missing over the weekend. (Las Vegas Review-Journal)
Buffets won’t reopen soon, but they may return eventually - VIDEO
In a Tuesday earnings call, Frank Fertitta III, CEO of Station Casinos parent company Red Rock Resorts, said buffets won’t be among the amenities included in the early stages of the resorts’ reopenings. (James Schaeffer / Las Vegas Review-Journal)
'Hamilton' to debut on Disney+ in July - Video
The film version of Lin-Manuel Miranda’s popular musical was originally set for theatrical release in October. The musical’s director, Tommy Kail, shot three live performances featuring the original Broadway cast. (Las Vegas Review-Journal)
Little Richard dead at 87 - VIDEO
Little Richard, the pioneer and rock 'n' roll originator, died on Saturday, May 9. His son, Danny Penniman, confirmed the news but the cause of death is unknown. (Las Vegas Review-Journal)
Jerry Stiller, actor and comedian, dies at 92 - VIDEO
Jerry Stiller's son, actor and director Ben Stiller, announced his father's death via Twitter. Jerry Stiller became widely known with a recurring role on "Seinfeld" as Frank Costanza, George's hot-headed father. He also starred on "King of Queens." (Las Vegas Review-Journal)
Wolfgang Puck's Players Locker opens in Downtown Summerlin along with others - VIDEO
Under the governor's orders a few restaurants were able to open their dining rooms in Downtown Summerlin Saturday, May 9. (Las Vegas Review-Journal)
Nicolas Cage to portray Joe Exotic in ‘Tiger King’ TV adaption - VIDEO
Nicolas Cage is headed to television to take on the role of Joe Exotic, the iconic character from the Netflix docuseries "Tiger King." (Las Vegas Review-Journal)
Quarantined! 'The Ghost Adventures' miniseries by Zak Bagans - VIDEO
The four-part miniseries “Ghost Adventures: Quarantine” by Zak Bagans will debut in June on the Travel Channel. (Las Vegas Review-Journal)
10 facts about Cinco de Mayo - VIDEO
The holiday celebrates the Battle of Puebla in 1862. Mexico began the holiday in 1862, but does not recognize it nationally anymore. (Las Vegas Review-Journal)
Kristin Cavallari has already filed for divorce - VIDEO
Kristin Cavallari, the "Very Cavallari" star, announced she and her husband, former NFL quarterback Jay Cutler, have separated after seven years of marriage and 10 years together. (Las Vegas Review-Journal)
Brad Pitt portrays Dr. Anthony Fauci on ‘Saturday Night Live’ - VIDEO
"Saturday Night Live’ aired their second socially distanced episode of the COVID-19 pandemic on April 25. The episode’s cold open featured actor Brad Pitt portraying Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Disease. (Las Vegas Review-Journal)
Brian Dennehy, 'Tommy Boy' and 'First Blood' star, dies at 81 - VIDEO
Actor Brian Dennehy died Wednesday in New Haven, Connecticut. Dennehy's acting career spanned more than four decades, working in television, film and theater. (Las Vegas Review-Journal)
Bishop Gorman 'Guys and Dolls' virtual performance
Bishop Gorman's virtual opening of "Guys and Dolls." (Bishop Gorman High School)
John Prine, country-folk singer, dies at 73 - VIDEO
John Prine died due to complications caused by COVID-19 at Vanderbilt University Hospital in Nashville, Tennessee on April 7. The singer-songwriter is counted as one the favorite artists by the likes of Bob Dylan and Kris Kristofferson. (Las Vegas Review-Journal)
Caesars furloughing about 90% of US workers
The furloughs come amid the COVID-19 pandemic, which has prompted all U.S. commercial casinos to temporarily shut their doors.
Bill Withers, soul legend and 'Lean on Me' singer, dead at 81 - VIDEO
Bill Withers' family said he died of heart complications on Monday in Los Angeles. Withers was a three-time Grammy winner. His other major hits include “Ain’t No Sunshine" and “Lovely Day.” (Las Vegas Review-Journal)
Vegas KatsWalk: From the Mandalay Bay to Excalibur - VIDEO
Review-Journal columnist John Katsilometes walks and talks along the Las Vegas Strip, from Mandalay Bay to Excalibur. (John Katsilometes and Kevin Cannon / Las Vegas Review-Journal)
Make Ivan Grant's Quarantini - VIDEO
Ivan Grant, a flair bartender at Long Bar at The D Las Vegas, makes his Quarantini. (Ivan Grant)
Fountains of Wayne's Adam Schlesinger dies from coronavirus - VIDEO
According to Variety, 52-year-old frontman and songwriter Adam Schlesinger has died, following a short battle with the respiratory illness, coronavirus. (Las Vegas Review-Journal)
KATS WALK: A walking tour on south Las Vegas Strip – VIDEO
RJ columnist John Katsiometes takes a walking tour of the south end of the Las Vegas Strip. (John Katsiometes and Kevin Cannon/Las Vegas Review-Journal)
Tiger King character has Las Vegas connection - VIDEO
Entertainment reporter John Katsilometes talks about the popular "Tiger King" and Jeff Lowe, a central figure in the Netflix documentary phenomenon who wanted to do business with the last Las Vegas Strip entertainer to use wild tigers in his act. (Renee Summerour/Las Vegas Review-Journal)
Coranavirus victim Howard Berman playing the harmonica in April 2014 - VIDEO
Howard Berman, 66, playing the harmonica at a jam session in April 2014. Berman, who was active in the Las Vegas music community, died on March 24, 2020, from COVID-19. (Diana Andriola)
Boarded-up businesses in the Arts District add some color - VIDEO
Businesses in the Arts District have commissioned local artists to paint murals on the boards covering their doors and windows. When the boards are removed, they will be auctioned off to raise money for those affected by the coronavirus shutdowns. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Sold-out Electric Daisy Carnival still scheduled for May - VIDEO
In a post on his social media platforms, festival founder Pasquale Rotella confirmed that EDC remains scheduled for May 15-17 at Las Vegas Motor Speedway despite coronavirus concerns that have sideline scads of other live music events. (Michael Quine/Las Vegas Review-Journal)
City of Las Vegas responds to calls to allow restaurants offering curbside pickup
Alcohol is now allowed in curbside meal pickups in Las Vegas. The city of Las Vegas has responded to calls to allow restaurants offering curbside pickup service to include alcohol in those meals. (Las Vegas Review-Journal)
Stained glass stands test of time

There has been a revival in the popularity of stained-glass windows and not just in places of worship.

Italian cypress grows too tall to be used in residential landscapes

Q: I have just about reached my maximum frustration level with my 35 Italian cypresses. Between spraying them down weekly in the summer to keep the mites off and them not standing on their own without staking and guy wires for 2½ years, I am ready to give up. I am thinking about replacing them with 5-gallon dwarf golden arborvitae because they are smaller and easier to spray.

4 steps to fix an unexpected credit limit decrease

If you’ve had to lean on a credit card recently to cover expenses, discovering your credit card company decreased your limit is likely unwelcome news.