Nearly Half of Americans Have Reduced Retirement Savings — How To Get Back on Track
Written by
Brooke Barley
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Levi Leidy
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A recent study by Allianz Life Insurance found that, in the wake of high inflation and market volatility, 46% of Americans reduced or stopped saving for retirement. And most of them aren’t sure when or how they’ll get it back on track.
There is hope for improving retirement savings strategies, even if it doesn’t feel like it in the interim. The key is to start saving again, no matter how little it might be at first. Here are the methods experts recommend to grow your savings for retirement.
Educate Yourself
If you want to learn more about how best to invest your money, Allison Sanka recommends studying up. Sanka is a financial coach at Journey Financial Wellness and says there are many resources you can familiarize yourself with to get better at saving for retirement, or you can reach out to a financial planner for more help.
“As people become more knowledgeable, they gain the confidence to make informed decisions, optimize their retirement savings and navigate the complexities of the market with ease. Setting up time with a certified financial coach or accredited financial counselor can help address disabling money mindsets and behaviors, replacing them with productive financial habits,” Sanka said.
Start Small
You might be intimidated by how much is recommended you have by the time you retire. The good news is that you still have time to get there, and putting away any amount is better than nothing.
“Start by setting aside even a small amount regularly — it adds up over time,” said the founder of Arnie.co, Eliza Arnold. Arnold recommends finding retirement accounts with low fees (which Arnie.co offers) and participating in your employer’s plan if they offer one, as it often includes free money through matching contributions. “The more time your money has to compound, the better off you’ll be in retirement, so these small steps now go a long way in the future.”
Take a Look at Your Budget
When you go over your budget, is there something in your monthly spending that you can replace with retirement saving?
“Identify any nonessential expenses that can be reduced or eliminated, and redirect those savings toward retirement if you can,” Arnold said. “If you receive unexpected money, like a tax refund or bonus, resist the urge to spend it all and put a portion into your retirement fund.”
Automate Savings
Take advantage of your bank’s features and automatically take savings out of your paycheck that can go toward your retirement.
“Have an amount taken out of each paycheck and put directly into an investment fund— most appropriately a low-cost stock index fund,” professor of finance Robert R. Johnson recommended. “Automatic savings plans can take many forms. For instance, one can have a specific dollar amount or salary percentage taken out of each paycheck and put in a retirement plan or savings plan.”
Get a Second Job
If your current job just isn’t allowing you to save any money for retirement, it might be time to get another job that you can use as a retirement fund.
“Consider, if your lifestyle allows, taking on a side job or part-time work to increase your income and direct that additional income to retirement savings,” Arnold said.
Choose Investments Wisely
When you invest your retirement savings, make sure not to put all your eggs in one basket.
“Diversified investments such as mutual funds, index funds and exchange-traded funds (ETFs) are generally good for long-term retirement savings,” said James Allen, the founder of of Billpin.com.
Take Advantage of Catch-Up Contributions
“If you’re aged 50 or above, the IRS allows for catch-up contributions to retirement accounts, meaning you can contribute more than the usual limit,” said Andrew Latham, the managing editor at Supermoney.com. If you’re eligible, you can save another $7,500 after maxing out employee deferrals at $22,500 in your 401(k) for 2023.
Something to be aware of: Starting in 2024, if you make over $145,000, you will only be able to make catch-up contributions to after-tax Roth accounts. “If you qualify, contributing to a Roth IRA or Roth 401(k) means you pay taxes now, but withdrawals in retirement are tax-free,” Latham said.
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