Early Retirement: A Financial Reality Check for Generation X
As we approach the end of 2025, Generation X, those born between roughly 1965 and 1980, finds itself at a pivotal moment. With many now in their late 40s to early 60s, this generation is approaching what could be the final stretch of their working years, but the financial reality can be more complicated.
According to the 2025 American Dream Study, 69% of Gen Xers view retiring before age 65 as a key part of the American Dream. However, 40% admit they are not financially prepared to make that dream a reality. This disconnect between aspiration and readiness raises questions about how Gen X can close the gap, and whether early retirement is still within reach.
One challenge is the growing disparity between retirement goals and actual savings. A recent report found that the average Gen X household has saved only about $40,000 for retirement, and 40% have saved nothing at all.
Several factors can contribute to this shortfall. Gen X was the first generation to experience a shift from traditional defined-benefit pensions toward defined-contribution plans like 401(k)s and IRAs. This transition shifted responsibility for retirement planning to individuals, who now must manage factors such as market volatility, contribution limits, and investment choices.
Second, as members of the so-called “sandwich generation,” Gen Xers often support both aging parents and dependent children. These dual responsibilities can affect their ability to contribute consistently to retirement accounts. Economic disruptions, such as the dot-com bust in the early 2000s and the Great Recession in 2008, may have interrupted savings momentum during critical wealth-building years.
Healthcare costs can also pose a challenge. Although Medicare coverage begins at age 65, individuals retiring earlier must plan for out-of-pocket expenses. According to estimates, a person retiring at 65 in 2025 is expected to spend approximately $172,500 on healthcare during retirement, with nearly half of that amount attributed to Medicare Part B and D premiums. For those retiring before 65, bridging the insurance gap can be costly and complex.
Despite these challenges, there are actionable strategies Gen Xers can pursue to help improve their retirement readiness. Increasing contributions to retirement accounts such as 401(k)s, IRAs, and Health Savings Accounts (HSAs) can help accelerate savings.
Reducing debt and discretionary spending can free up cash flow for retirement investing. Additionally, planning for healthcare costs early, through COBRA, ACA marketplace options, or private insurance, can help mitigate financial strain before Medicare eligibility begins.
Developing a comprehensive retirement plan that includes income projections, Social Security estimates, healthcare cost modeling, and asset withdrawal strategies can help Gen X feel better prepared for retirement. Tools such as retirement calculators and financial planning software can provide insights, but working with a qualified financial advisor may offer the guidance needed to make informed decisions.
Beyond the financial considerations, early retirement can hold emotional and cultural significance for many Gen Xers, representing freedom, flexibility, and the opportunity to pursue personal passions. Intentional planning and execution can help that dream become a reality.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Patricia L. Hutchinson
Director of Retirement Plan Services
AIF®, MBA