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Here's a sobering statistic to jolt you awake: Only 20% of workers nearing retirement are financially on track.

Yes, just one in five. This startling figure highlights a significant and widespread issue — the retirement readiness gap.

Financial experts suggest that by age 55, you should have saved roughly eight times your annual salary. This quick-and-dirty benchmark (which we'll come back to in a minute) is designed to ensure you can maintain your lifestyle and cover unforeseen expenses once you stop working. However, the reality for many is starkly different.

To put it in perspective, according to the U.S. Bureau of Labor, the median salary for U.S. workers is about $55,000, but the median savings for workers aged 55 is only $50,000. That’s not even one times the median annual salary... let alone eight.

Why such a big disconnect?

What Happened to Gen X's Retirement Savings?

For Generation X — those folks born between 1965 and 1980 — the financial path to retirement has been anything but smooth. Prudential Financial's 2024 survey shows that just one in five people aged 55 have saved $447,000 or more, the magical "eight times your salary" number that represents a comfy retirement. The majority are nowhere near this figure.

For many in Gen X, the dream of a cozy retirement seems more like a fairy tale. A survey by investment bank Natixis found that 50% of Gen Xers believe achieving a worry-free retirement would require nothing short of a "miracle." And honestly, it's no wonder they feel this way.

Over the years, Gen X has been hit by financial storms that wiped out savings, wages that barely kept pace with inflation, and mounting debts that seemed to swallow any chance of saving for the future. Now, the oldest members of Gen X are on the eve of turning 60 and staring down the barrel of retirement with savings accounts that feel more like piggy banks than nest eggs.

The financial pressure isn't just about them; it stretches across generations. Many Gen Xers are helping aging parents and supporting kids through college, adding to the strain. As they scramble to catch up, some are turning to family for help. Studies show that about 25% of today's 55-year-olds plan to rely on family members for financial support during retirement.

Then there are the "silver squatters" — older adults moving in with relatives to make ends meet. In fact, 20% of those nearing retirement expect to need housing support from their children or other family members.

Beyond relying on family, some pre-retirees are considering other strategies like part-time work, tapping into home equity, or downsizing. These can help bridge the financial gap, but they require careful planning and a clear-eyed look at one's financial situation.

Meanwhile, younger generations, like Gen Z, are already dealing with their own economic hurdles, making the prospect of supporting their aging Gen X parents daunting. This financial juggling act underscores the need for multiple strategies to ensure a secure retirement.

Are You "On Track" for Retirement? Here's How to Check

Gen X's challenges highlight the importance of proactive financial planning. It's not just about hitting a certain number in your savings account; it's about adapting to your unique situation and maximizing your resources.

Let's go back to the beginning of the article and look at the metric Prudential used to measure how many Gen Xers are "on track" for retirement.

The Prudential survey says the recommended savings goal for 55-year-olds is eight times their income. That number comes from a list of age-related savings milestones parroted in many personal finance articles:

- Amount saved by 30 → 1x your income

- Amount saved by 40 → 2x your income

- Amount saved by 50 → 4x your income

- Amount saved by 60 → 8x your income

- Amount saved by 67 → 10x your income

These benchmarks offer a rough guideline, but I don't find them to be especially helpful because retirement (and how much it costs) looks different for everyone. Saving for retirement also looks different for everyone. High expenses, like healthcare or supporting dependents, can drastically alter your ability to save. Conversely, if you expect a pension or other steady income streams, you might need to save less.

There's another "retirement readiness" metric that I personally prefer, which is to take the annual income you hope to live on in retirement and multiply it by 25.

Theoretically, this number is the point where you can live off your retirement savings indefinitely. Essentially, you're calculating based on a 4% annual withdrawal rate, which is considered a safe bet for a typical 30-year retirement.

While some critics argue that this calculation isn't perfect, it gives you a retirement savings goal based on what you'll actually need to cover your retirement costs, not just a number based on your income.

Of course, if you're interested in diving deeper into how much you'll need for retirement, there are some fantastic retirement calculators out there to help you out. You could also meet with a financial advisor who specializes in retirement planning.

Whether you're on track to hit your goals or haven't saved a penny, understanding your retirement needs and actively monitoring your progress is key to success. Regularly reassessing your financial situation and adjusting your strategies can help ensure you're on the right path.

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The retirement readiness gap is a challenge many face, but with proactive planning and smart strategies, you can improve your financial outlook. Reflect on your preparations and remember that the journey to a financially secure retirement starts with a single step, so take action now to safeguard your future.