We’ve written a lot about retirement and retirement savings in these posts over the last several months, and one of the topics we’ve hit on is how the majority of Americans aren’t saving enough for their golden years.
According to a recent report on CNBC, a surprising 17 percent of Baby Boomers have less than $5,000 stashed away for retirement. To put it lightly, that’s not good. Furthermore, a report from Northwestern Mutual says that only about 16 percent of all Americans have more than $200,000 saved for their future. About 45 percent don’t know how much they have saved.
This is all troublesome data, especially when you consider that the majority of employers aren’t offering their workers any sort of pension plan any longer to help fund their post-work years. That means that Americans will need to live off money from any IRA or 401K savings account, and Social Security benefits. While the aforementioned data is worrisome to look at, we recently came across another surprising statistic from the same Northwestern Mutual report where many of the above figures came from: About 15 percent of Americans don’t have anything saved for retirement.
Zip. Zero. Nada.
Considering that most financial experts advise stowing away at least $1 million for retirement, many Americans are woefully behind. In fact, only about 10 percent of all Americans are confident they’ll have enough saved to comfortably live in retirement. About 45 percent say they think there’s a chance of running out of money in retirement, yet the vast majority of those surveyed who indicated this say they’ve done nothing to remedy the issue.
This is all a pretty big problem, and it’s obviously very important to save for retirement accordingly unless you want to be working for the rest of your life. In the next section, we’ll provide some tips on how to save and some strategies that you should be considering while you’re saving:
- Start saving as early as possible: As soon as you land that first job out of college, start saving for retirement. If you’re able to catch on with an employer that offers a matching program for its 401K plan, make sure you’re saving so that you’re getting the maximum company match. This essentially means you’re getting free money each pay period, so it behooves you to take full advantage of this.
- Diversify: It’s great if your employer offers a 401K plan, but financial experts will tell you that it pays not to have all of your eggs in one basket. That said, look into opening up an IRA that you can allocate money into as well. Between an IRA, 401K and Social Security, you should be pretty well set if you stick to a savings plan and don’t divert from it.
- Try to increase your savings annually: Ideally, the more experience you gain professionally, the more income you’ll earn. That said, try to always increase the percentage of your pay you put into your retirement account by 1 percent each year. Most financial experts say that you should be trying to invest 15 percent of your pay each year, including company match. If this number isn’t feasible, try to get on a path where it becomes doable.
Take other costs into consideration: Think you’ve saved enough or are on the right savings track for retirement? Think twice, as there are a lot of other retirement-related costs that many people don’t account for. Perhaps the largest is medical costs, as it’s estimated that senior citizens might pay as much as $250,000 in out-of-pocket medical fees in retirement. Make sure you’re accounting for inflation as well in your retirement savings.
Regardless of your age, take the time to assess where you stand in your retirement savings. Are you on track to meet your goals and live comfortably in your twilight years? Or are you more like the professionals that are likely not saving enough? Take stock now, and make the adjustments before it’s too late.