This process can help you identify and eliminate wasteful spending, freeing up money to make larger retirement account contributions. Even seemingly small splurges can add up, as Eckels discovered when she recently reviewed her expenses and found that she had spent more than $2,000 on manicures and pedicures over the course of a year.
Knowing how much you’re spending and where you can cut back can also give you a clearer picture of how much money you’ll need in retirement to support the lifestyle you’re accustomed to.
Letting emotions drive your investment decisions
Brenna Baucum, founder of Collective Wealth Planning in Salem, Oregon, says Gen Xers often react emotionally to market downturns. That tendency may be rooted in their experience of the Great Recession, which struck when members of Gen X were in their late 20s to early 40s.
“There was enough in their savings account to feel nervous about it,” Baucum says. Some were so worried they pulled out of the stock market entirely, she says. And selling during downturns can create long-term setbacks for retirement savings.
Keep calm and carry on: You’re typically better off sticking to your retirement savings plan and giving your investments time to recover rather than moving your savings to cash during a downturn. Cash accounts tend to earn lower returns than stocks over time. As a result, your savings won’t grow enough to keep up with the pace of inflation. Even if you get back in the stock market, you could miss out on gains if you don’t time it right. (As you may have heard, you can’t time the market.)
Tapping your retirement accounts early
Nearly a quarter of Gen Xers who participate in a workplace retirement plan have borrowed from their account, according to the Schroders survey, often dipping into their plans to pay for emergencies or manage rising living expenses.
IRS rules allow 401(k) account holders to borrow up to 50 percent of their vested balance or $50,000, whichever is less. The loan must be repaid with interest. Any unpaid balance is considered a withdrawal and is taxed at your regular income tax rate, plus a 10 percent early withdrawal penalty if you’re younger than 59½.
Although the interest you pay on the loan goes back into your account, the borrowed funds miss out on market gains, Cooper says. “Raiding your retirement plan is an enormous setback that is very difficult to get over,” he says.
Build an emergency fund: You’ll be less likely to dip into your retirement account if you set aside cash for unexpected expenses. Financial planners typically recommend amassing an emergency fund to cover three to six months’ worth of expenses. Having a percentage of your paycheck automatically deposited into a savings account can help ensure your rainy day fund actually gets funded.
If you don’t have a sufficient stash of cash when an emergency strikes, Cooper recommends getting a secured loan rather than borrowing from your retirement account. Secured loans are backed by collateral, such as a vehicle or home, and typically have lower interest rates than personal loans or credit cards.
If you do borrow from your 401(k), Cooper recommends boosting contributions to your account once you’ve paid back your loan to make up for lost ground. You can contribute up to $24,500 to a 401(k) in 2026, plus an additional $8,000 for most workers age 50 or older. For those ages 60 to 63, these “catch-up contributions” can be even larger: up to $11,250.