How Americans Can Save More Money for Retirement
Americans who want to have a comfortable retirement should prioritize their savings. And the sooner you start planning for retirement, the easier it is to accumulate enough money for a comfortable retirement.
Time is on the side of young adults who start saving now, but older adults can still catch up if they're behind. "It's never too late to save something," said O'Connor. Here's a five-step plan to help you ramp up your retirement savings:
Step 1: Review Your Spending Habits
If you haven't saved anything because you think you can't afford to, take the time to review your spending. Even if you're living paycheck to paycheck, you might be able to set aside more than you think if you cut unnecessary expenses. "Anybody, if they put all of their obligations on paper, can see that they can carve out $100 to put away," said Zgainer.
Step 2: Consider Saving in an IRA
You might not have access to a retirement plan through work, but you can save money with an IRA. You can save up to $5,500 a year in a traditional IRA or Roth IRA. Or, you can save money with a SEP, SIMPLE IRA or solo 401k if you're self-employed.
Step 3: Pay Down Debt
Don't let debt get in the way of saving. If you owe money, create a plan to pay down your debts. That plan should include leaving enough room in your budget to save for retirement, too.
"Continue to put something into a retirement fund so you get that tax-deferred growth and have those years for your earnings to compound," said O'Connor.
Step 4: Increase Your Savings Rate
Increase the amount you save every year. Unfortunately, many people choose a percentage of income to contribute to a retirement plan and never increase it.
On average, retirement savers are contributing 5 percent to 8 percent of their income to a 401k, said Zgainer. But, they should be saving 15 percent or more of their income. You can reach that goal by boosting your contributions when you get pay raises or bonuses. Or, commit to save 1 percent more every year.
Step 5: Get Creative
If you're near retirement age, "it's time to get creative," said O'Connor. That might mean working longer to give yourself more time to save. Or, you could get a side gig to earn extra money to put into retirement savings.
Also, you might want to move to a city where your nest egg will stretch further. "Certain areas of the country are much less expensive," said O'Connor. The cheaper your cost of living, the less money you'll need to have saved for retirement — and the more money you'll have for a comfortable retirement.
Methodology: GOBankingRates used Survata to conduct this poll. Respondents first were asked a screening question: "Do you have retirement savings?" Those who answered "No" were then asked: "Which of the following is the main reason you do not have any retirement savings?" Respondents could select one of the following answer options: 1) "My employer does not offer a retirement savings plan," 2) "I had to use the money early for a financial emergency," 3) "It is not a priority for me," 4) "I won't need any retirement savings" or 5) "Other." Responses were collected from 259 adults on March 7, 2017, and are representative of the U.S. online population.