Gen X workers are making 10 tax mistakes that can cost them thousands. How to fix them fast before retirement

For Generation X, a group now aged between 46 and 61, retirement is no longer a distant goal but the next stage in many people’s career journeys.

But the critical 10 to 15 years before retirement come with a number of savings traps, and tax experts say this generation may not be able to avoid them effectively.

Tax risks are particularly significant for high earners, defined as those earning $150,000 as individuals or $300,000 as a couple.

Here are the top 10 mistakes you can make with your savings and tax planning and why these mistakes can have the biggest impact in your highest-earning years.

Many Gen Xers may think they can wait until retirement to make Roth conversions, but the delay can result in a large tax bill that can be difficult to pay.

Instead, consider Roth conversions in the lower-income years before retirement, when you have more control over taxable income and can avoid moving into higher tax brackets.

Keep in mind that when required minimum distributions (RMDs) begin at age 73, these required withdrawals can increase your tax bracket, taxes owed, and expected Medicare premiums.

To minimize this tax burden, consult a financial advisor or tax professional to determine how much money you can convert now to reduce taxes later (1).

Read more: How can you apply Dave Ramsey’s 7 Baby Steps to your own life?

Only 16% of Generation X Americans think they have enough savings for retirement, according to a 2025 survey from Schröder. In fact, most expect a shortfall of approximately $404,976 (2).

If this sounds familiar, it’s important to maximize capture contributions whenever possible.

The 401(k) contribution limit for 2026 is $24,500, and employees age 50 and over can add another $8,000 to that limit. Note, however, that if you earn $150,000 or more, catch-up contributions may have to go into the Roth (after-tax) portion of your 401(k) rather than the traditional pre-tax portion under the new tax rules, which may not reduce your taxable income (3).

This tax is designed to ensure that high-income earners pay a minimum level of taxes. Especially for couples earning around $300,000 or more in high-tax states, this can be triggered if you exercise incentive stock options, claim large state and local tax (SALT) deductions, or use certain investment strategies. Consult your financial advisor before taking any of these actions.

According to Fortune, the “sandwich generation,” which supports both children and aging parents, now represents nearly 30% of Gen X women (4). If you provide care for an elderly loved one or a disabled child, you may qualify for a tax credit.

If you provide more than half of a parent’s financial support and he meets the income requirements, you may be able to claim him as a dependent. The Other Dependent Credit is worth up to $500 and provides a modest reduction on your tax bill (5).

Tax credits like the American Opportunity Credit and Lifetime Learning Credit can be valuable to Gen Xers paying for their children’s college education.

But Finance Buzz warns that parents often claim credits for expenses already covered under tax-free scholarships or 529 plan cancellations, or claim the credits in the wrong year. Making this mistake could trigger an audit or mean you miss out on thousands of dollars in tax savings.

If you sell large assets to finance care costs or your child’s college tuition, you could trigger a large capital gains tax bill that will dent your budget. If your income is high from real estate or other investments, consult a tax professional to understand the risks of selling.

Generation Xers, who earn much more than in previous years, also need to review their tax withholding strategies to ensure they meet their tax obligations. The IRS offers a withholding estimator that is useful if you received a large raise, bonus, or stock-based compensation (6).

Schroders notes that the 24% of Gen Xers with a 401(k) or similar retirement plan take out more loans than other generations. This is a risky strategy because not only do you lose out on the potential growth of the money you borrowed, you also end up paying yourself interest as you pay it back (7).

A 401(k) loan may pause your employer’s contributions, and you’ll need to repay the loan quickly if you leave your job. Failure to do so may result in taxes and penalties.

Schröders also found that only 26% of Gen Xers work with a financial advisor, fewer than millennials or younger generations. A surprising 53% admitted they have no retirement plans, despite being close to their peak earnings and retirement years.

Working with a financial advisor is key to avoiding tax mistakes, maximizing retirement savings, and gaining peace of mind about your finances today and in the future.

The Certified Financial Planner Standards Board also found that people with advisors score higher on several indicators of financial health: they are more likely to have an emergency fund, make a will, have a comprehensive financial plan, and report that they are “living comfortably” (8).

If you qualify for a Health Savings Account (HSA), you can take advantage of tax-deductible contributions, tax-free growth, and tax-free withdrawals for eligible medical expenses; This makes it a valuable tool for high-income earners.

HSA contribution limits for 2026 are $8,750 annually for families; If you are 55 or older, there is an additional $1,000 catch-up contribution. This can translate into significant retirement savings if the funds are not needed for major medical expenses while you are still working (9).

High-income earners are advised to work with tax professionals to use donations strategically. Pooling donations into a single year can reduce taxable income while also supporting a cause you care about, especially if you face a higher-than-usual tax bill.

Too many older workers don’t realize how they’re using tax planning incorrectly. Financial mistakes closer to retirement are harder to correct because there is less time to save and catch up on lost contributions.

Costly financial mistakes can have long-term effects on retirement, but with the right knowledge and tax strategies, Gen Xers still have time to improve their financial outlook before age 65 (10).

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FinansBuzz (1); Schroders (2); Kiplinger (3); Luck (4); Internal Revenue Service (5),(6); bank rate (7); CFP Board (8); Farther (9); Davis’ Capital (10)

This article was first published on: moneywise.com under the title: Gen X workers make 10 tax mistakes that could cost thousands. How can I fix these quickly before retirement?

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