Jean Chatzky makes key statement on 401(k)s, retirement

Working Americans preparing for retirement have many things in common.

They all hope for enough financial security to live the lifestyle they have always envisioned. They often rely on 401(k)s and IRAs for retirement savings. Many have built home equity to help achieve the wealth necessary to reach their financial goals.

They also understand — at least generally — the roles Medicare and Social Security will play in their health and finances after their main careers are over (although many will continue working to some degree in retirement). 

That said, there is one big difference that often accounts for how seriously people are looking into retirement details: how close they are to the reality of retirement age.

Jean Chatzky, the former NBC "Today Show" financial editor and founder of HerMoney, notes that the first Americans in Generation X (often defined as those born between 1965 and 1980) are turning 60 right now. 

"I was born in 1964, which makes me a cusper," she said on a recent episode of the "HerMoney with Jean Chatzky" podcast. "I'm the youngest of the boomers, I guess, the oldest of the Xers."

"I always felt like I kind of walked away with a combo platter," she added. "Some boomer drive, but Gen X worries, especially when it comes to the topic of retirement." 

Jean Chatzky explains a 401(k) problem confronting Generation X

Chatzky believes that members of Generation X were among the first to experience major financial headwinds as retirement plans moved from pension-based plans to 401(k)s, which were new and not widely understood as they entered the workforce.  

"Even though Gen X has been called the slacker generation — and, by the way, I take umbrage with that," she said. "You could argue that the odds were stacked against Gen X from the start."

"Traditional pensions mostly disappeared right as we entered the workforce," Chatzky continued. "Yet 401(k)s didn't become mainstream until much later." 

"And let's not forget all of the economic gut punches that we endured: the tech bubble, the great recession, the pandemic, which disrupted our abilities to save during some really key earnings years."

Jean Chatzky explains her own early experience with a 401(k) plan

Chatzky noted that there are roughly 64 million Americans that comprise Generation X, currently in their mid-forties to about 60. 

"The fact is there have been these economic challenges," she said. "The whole business with the 401(k) coming on stream — my goodness. Nobody knew what it was what we were supposed to do." 

"Nobody gave us the financial education to even know what to invest in," Chatzky emphasized. "And frankly, there weren't very many options. Nor could you put very much money into a 401(k) at that time." 

Chatzky explained that suddenly she was thrust into a do-it-yourself environment. And she considers herself a classic case.

"I got my first job in 1986 right after graduating from college and my employer had a 401(k) and I was put into the 401(k) but was never told what to do with it." she said. "I was never told, 'You should be putting X amount of your paycheck into this account and then investing it in things.' I had never even heard of mutual funds."

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She recounted how, as a result, when she left that job about two years later, she got a check in the mail. 

"And I was thrilled. I took the money and I went shopping for clothes for my new job," she recalled.

Later, she did some retirement savings math regarding that money.

"I did go back through the exercise of figuring out if I had done that 401(k) right at the time, what the money would be worth," she said. "And it is really not insignificant. Which is why I think when we do a Google search, we come up with headlines like 'Gen X is in trouble' and 'Retirement plan in crisis.'"

Jean Chatzky says some change will be necessary

Chatzky believes there is reason for optimism. There is still time to catch up on 401(k)s for Generation Xers. But she also recognizes that lifestyle changes, for many, are in order. 

"If you make an effort to become more optimistic, if you make an effort to become more resilient, totally possible," she said. "These are learnable skills, which is important because we are going to have to tap dance a little bit. We are going to have to make changes." 

Related: Dave Ramsey warns Americans on critical Medicare mistake to avoid

Chatzky explains one example of a lifestyle adjustment many need to consider. 

"A lot of Gen Xers have experienced lifestyle creep as our salaries have gone up," she said. "We've gotten bigger homes. We've gotten nicer cars. Maybe we've gotten a second home."

"It's hard to give things up, but recently Goldman Sachs issued a report that said, 'Look, if you are feeling behind, it's time to get a little lean and a little mean.'"

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