With inflation on the rise in recent years, it’s no surprise that many Americans are taking a closer look at their retirement accounts and feeling uneasy about what they see. With everyday essentials costing more than ever, Americans haven’t had the budget flexibility to contribute as much money to their golden years as they have in the past.
A recent survey conducted by GOBankingRates highlights these concerns, revealing that a significant 36% of Americans lack confidence in their ability to save adequately for retirement. Another 40% express only a moderate level of confidence, with just 23% feeling genuinely secure about their financial prospects in retirement.
If you’re among those feeling uncertain about your retirement savings, rest assured that you’re not alone, and it’s not too late to make positive changes. In this article, we’ll explore expert tips and tricks to help you enhance your retirement savings strategy before you retire.
Americans Closest to Retirement Age Feel the Least Secure
Regrettably, it’s those closest to retirement age who are grappling with the most significant concerns about their retirement savings. The survey paints a worrisome picture, with a staggering 50% of those aged 55 to 65 lacking confidence in their savings. With the U.S. retirement age ranging from 66 to 67, depending on birth year, these individuals are facing the prospect of retirement with minimal financial security.
Conversely, younger Americans appear less worried about their retirement savings. Only 19% of those aged 18 to 24 express doubts, with 28% of those aged 25 to 34 sharing similar concerns. However, as age increases, so does apprehension, with 39% of those aged 35 to 44 and 46% of those aged 45 to 54 feeling uncertain about their retirement savings. Even among those over 65, who may have already reached retirement age, 41% express discomfort about their financial preparedness.
Women Are Feeling Less Confident About Affording Retirement Than Men
Women also seem to be bearing more of the strain of retirement savings concerns. According to the survey, 39% of women lack confidence in their ability to afford retirement, while only 33% of men share this sentiment.
6 Ways to Quickly Ramp Up Your Retirement Savings
Considering that the majority of individuals expressing insecurity about retirement savings are in their 50s and 60s, fast-tracking savings becomes a top priority. Here are six proven strategies to help you boost your retirement savings quickly.
Increase Retirement Contributions
If you’re feeling the pressure of impending retirement, consider allocating a higher percentage of your income to your retirement account.
“If you’re currently contributing 6% of your income to a 401(k), try bumping it up to 10% or even 15%,” said Jeff Rose, CFP and founder of GoodFinancialCents.com. “Additionally, if you receive a bonus or tax refund, instead of splurging, direct a good chunk, say 50% or more, into your retirement savings. It’s like finding extra pockets of money and making sure they grow for your future.”
Eliminate Any Debt
It’s easy to overlook, but debt payments can eat into your disposable income, making it challenging to save for retirement.
“Paying down your debt will lower your expenses in retirement and save you money,” said Jay Zigmont, Ph.D., CFP and founder of Childfree Wealth. “You can look at any interest you avoid as a tax-free, risk-free return. Your goal should be to be debt-free, including your house, by the time you retire. If you have no debts whatsoever, your expenses will be low, and you will not need as big of a nest egg to retire with.”
Human behavior often poses the biggest hurdle to building wealth. Overcome this challenge by automating your finances as much as possible, reducing reliance on willpower alone.
“My favorite hack is to leverage paycheck deferrals directly from my pay stub into different savings buckets, such as my emergency reserve,” said Christopher Stroup, a certified financial planner at Abacus Wealth Partners. “If you don’t see money hit your primary checking account, you’re less likely to spend it. Speak with your human resources or payroll department to understand how you can go about establishing this automatic savings framework.”
Delay Social Security Benefits
Delaying Social Security benefits can result in more substantial payouts.
“Consider delaying Social Security benefits until age 70, which can increase your monthly benefit by up to 8% each year you delay after your full retirement age, providing a substantial income in the later years,” Rose said.
If you are able to put off claiming until age 70, you can enjoy a higher income and more financial flexibility during your golden years.
Contribute to an HSA
Healthcare costs can accumulate rapidly and pose a significant expense during retirement. In order to take a bit of stress off your back and maximize healthcare benefits during retirement, contribute to an HSA account.
“It’s essential to plan meticulously for healthcare costs, which can average around $315,000 for a 65-year-old couple retiring in 2023, according to Fidelity,” Rose said. “One way to address healthcare costs is by contributing to a Health Savings Account (HSA), which offers triple tax benefits and can be used for qualified medical expenses. Maximizing contributions to an HSA can provide a substantial financial cushion for healthcare costs in retirement. Those 55 and older can contribute a total of $4,850, which includes the catch-up contribution.”
Remember Every Dollar Saved Counts
Embarking on retirement savings can seem daunting, especially if you’re in your 50s or 60s and haven’t started yet. However, it’s crucial to remember that every dollar counts, and starting small is better than not starting at all.
“It can feel daunting to prioritize savings when you’re juggling large expenses like student loan debt, childcare costs and housing,” Stroup said. “Time is one of your greatest assets while you’re young, which means that small amounts tucked away today can grow into much larger amounts years down the road. To give yourself the best chance at achieving the future you want, begin to flex the savings muscle early and often, no matter the dollar amount.”
Methodology: GOBankingRates surveyed 1,037 Americans aged 18 and older from across the country between Sept. 5 and Sept. 7, 2023, asking fifteen different questions: (1) How much money do you currently have saved for retirement?; (2) How much money do you think you’ll need in retirement?; (3) How much do you spend or expect to spend monthly during your retirement?; (4) If you aren’t yet retired, how much do you expect to get from Social Security during your retirement?; (5) How much of your retirement do you plan to fund with Social Security?; (6) At what age did you or do you plan to claim Social Security benefits?; (7) Did you or do you think you will have to move to afford your retirement?; (8) Which of the following proposed Social Security solutions do you think would work best to prevent the trust fund from being depleted?; (9) What sources of income will you have in retirement? (Select all that apply); (10) How confident are you that you will have saved enough to afford retirement?; (11) If you retired early, at what age did you retire?; (12) Are you counting on help from your family (financial, housing, long-term care, etc.) to afford retirement?; (13) Do you think retiring around age 65 is financially possible for most Americans?; (14) What worries you financially about retirement? (Select all that apply); and (15) If you got a stimulus check in the last two years, how much of the money did you save for retirement?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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