Americans Expect Their Retirement Savings To Last 22 Years
Written by
Karen Doyle
Edited by
Amen Oyiboke
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
According to the Natixis Global Retirement Index, most Americans plan to retire at age 64. Given current life expectancies, that means they’ll spend about 22 years in retirement. But will their savings last that long — and will yours?
Here are some steps you can take to improve your chances of having enough in savings to see you through 22 years of retirement.
What To Do If You’re Not There Yet
The survey asked investors what they think they need to do if they don’t think they have enough saved to last through their retirement. They cited several strategies to help achieve retirement security.
Save More and Spend Less
Almost two-thirds (64%) of U.S. investors said the first step to take is to save more and live more frugally. This two-pronged approach is simple to understand but hard to do. Nevertheless, it is probably the thing that those contemplating retirement have the most control over.
Saving more may mean increasing your contributions to retirement plans and starting or adding to a savings account. Whenever you have a salary increase, whether it’s a raise at your current job or a new position with a higher salary, dedicate half of it to savings. Before you get used to the higher paycheck, increase your retirement plan contributions at a rate equal to half of the salary bump. You’ll still feel like you got a raise, and you’ll be putting more away for retirement.
Living more frugally may mean “practicing” your retirement lifestyle now: fewer vacations, less dining out and more intentional spending. Before making a purchase, ask whether the item is more important than long-term financial security.
Have a Plan
“If you fail to plan, you plan to fail” is an axiom you’ve probably heard many times. The investors who responded to Natixis’s survey say that it’s important to have a long-term financial plan if you don’t want to outlive your money. That means starting now, not when you’re knocking on the door of retirement.
You can attack this plan in one of two ways. You can plan for the amount you’ll save, outlining the steps you need to take in order to get to the level of savings that you need in order to reach that magic number. Or, you can determine how much you’ll need, and then back in to how you can save for it. Either way, the end result of your plan should be a secure retirement.
Increase Your Investment Returns
While easier said than done, boosting investment returns can significantly accelerate your retirement savings, especially when you’re younger. Consider taking a more active role in managing your portfolio, rebalancing when necessary and aiming for long-term growth.
Know What You Need
By estimating what you’ll spend in retirement, you’ll have a better idea of how much you need. One thing that it’s easy to underestimate is the cost of healthcare. Sure, you’ll have Medicare, but there are costs associated with that, and things that it doesn’t cover. Fidelity estimates that a 65-year-old retiring in 2025 can expect to spend an average of $172,500 on healthcare and medical expenses in their retirement.
In addition to knowing how much your retirement will cost, it’s important to know how you will withdraw funds to cover those costs. Paying attention to taxation is critical — withdrawing from tax-deferred accounts like IRAs and 401(k)s too early and at too high a rate can mean you’re paying more in taxes than you have to.
Keep in mind that your retirement could be significantly longer — or shorter — than the 22-year average. And sometimes retirement isn’t voluntary. You could have to retire earlier than expected due to health issues or the inability to find work in your 60s. It’s important to have a bit of a cushion if possible, making these strategies even more important.
More From GOBankingRates
