Should Generation X Pay Off Debt Or Save For Retirement?

Generation X is faced with a dilemma. Should they pay off their debts or save for retirement? Right now there often isn’t enough money for both due to all of the obligations they face.

As it turns out, many Gen Xers are choosing to attempt to pay down debt instead of saving for retirement. But financial experts say this may be a mistake.

So what should Generation X do?

3 Money Mistakes Gen Xers Are Making from The Motley Fool

“Generation X has the most credit card debt of any generation, according to a GOBankingRates survey. The high interest rates — sometimes as great as 30% — can make it difficult to get out from under the debt, but the more troubling statistic is that half of all Gen Xers say they won’t begin saving for retirement until they get their credit card debt under control. While paying down your credit debt is a smart move that will help save you money and improve your credit score, that doesn’t mean you should press pause on your retirement savings.”

“If you have credit card debt that you need to pay off, it may be wise to prioritize paying it off, because the interest rate you pay on that debt will likely be higher than any return you earn on your retirement savings. However, if you’re not drowning in high-interest credit card debt, then you can put money toward your balance and your retirement savings.”

According to Credit Card Debt Preventing Many Gen Xers From Saving for Retirement from Plan Advisor

“Many Generation X members are struggling with debt, Allianz Life found in a survey. Their non-mortgage debt, i.e. credit card and student loan debt, has increased 15% since 2014, rising from an average of $20,000 to $23,000.”

“Forty-nine percent of Gen Xers pay only a portion of their credit card debt each month, up from 46% in 2014. Forty-two percent view carrying debt as a fact of life.”

“Fifty percent of Gen Xers say they cannot start saving for retirement until they pay off their credit card debt, and 50% say they are embarrassed to tell a financial professional about their debt. Thirteen percent say they cannot afford to save for retirement, compared to 7% of Millennials and 10% of Baby Boomers.”

Is there a way for Generation X to do both? According to Financial Advisor Mag in The Unique Challenge of Advising Generation X, yes.

“’Generation X,’ as this demographic is commonly known, presents something of a dichotomy. While many Gen Xers are bringing in good incomes, plenty are also still paying down student debt while simultaneously caring for children and potentially for aging parents as well.”

“Given all of these competing priorities, a lot of Gen Xers (now aged 38 to 53, according to Pew Research) have focused their financial strategies on paying down debt at the expense of retirement planning. This is a natural instinct, as looming debts tend to feel more pressing than retirement, which for most in this group is still decades away.”