Saving for retirement is important.
With company pensions going extinct, Social Security slowly running out of funds and inflation running rampant, it’s up to you to save and invest enough for a comfortable retirement.
But are you saving enough?
GOBankingRates recently polled Americans to understand how much they have put away for retirement. We’ll break down the results and share some tips for boosting your retirement savings to help you become an above-average saver.
14% of Americans Have $100,000 Saved for Retirement
Most Americans are not saving enough for retirement. According to the survey, only 14% of Americans have $100,000 or more saved in their retirement accounts. In fact, about 78% of Americans have $50,000 or less saved for retirement.
But what’s more concerning is the number of people who haven’t saved anything yet. Nearly 37% of respondents indicated they haven’t started saving for retirement at all.
Respondents aged 65 and older have the most saved (as expected); but, according to the survey, just 36% of that age group have $100,000 or more saved, and almost 24% haven’t saved anything at all.
Here’s how many Americans have more than $100,000 saved for retirement (by age):
- Age 18-24: 2.1%
- Age 25-34: 4%
- Age 35-44: 11.5%
- Age 45-54: 11.4%
- Age 55-64: 26.4%
- Age 65 and over: 36%
Most Retirees Will Depend on Social Security
With 64% of Americans over age 65 having just $100,000 or less saved for retirement, most retirees will depend on Social Security to live in retirement. In fact, nearly a quarter of new retirees may be depending on Social Security as their only source of income in retirement.
This is concerning, as the Social Security Administration has stated that they expect to cut benefits by up to 22% by the year 2034. This means that Americans who aren’t saving enough now may see their benefits cut by the time they reach retirement, making it harder to retire.
While there are some budget-friendly places to live on just a Social Security check, it’s best to supplement your retirement with investments of your own.
How Much You Should Save for Retirement?
Saving for retirement is a marathon, not a sprint. Along the way, there are some milestones you can aim for. Everyone has different retirement needs, but there are some benchmarks to look at when saving.
According to Fidelity, Americans should aim to save at least 15% of their pre-tax income toward retirement (including employer match). But this assumes you are starting at age 25 and work a full career through age 67.
If you are starting later in life, you may need to save more. If starting at age 30, Fidelity recommends saving at least 18% of your pre-tax income; if you don’t start saving until age 35, save as much as 23% of your pre-tax income.
Of course, how much you need is highly dependent on your life expectancy, retirement living expenses and other factors. But these guidelines can help you get on track.
Experts Weigh In: How To Plan for Retirement
Saving for retirement can feel daunting; but, if you have a plan in place, you can be confident that retirement can be within reach by the time you are eligible.
We’ve asked industry experts and financial planners to share their best strategies for savings for retirement — even if you’re starting late.
Mike Hunsberger from Next Mission Financial Planning said, “It’s never too late to start. The critical thing is just to do it. Start saving just 1% of your income, preferably in a tax-free or tax-advantaged account linked to an IRA or 401(k). Then, every year on Jan. 1, raise it 1%. This will be a small increase that you probably won’t notice.”
This strategy can help you get in the habit of saving. While it might not feel like you’re making a dent in retirement, you’re building a foundation for compound interest to start working.
David E. Barfield from Datapoint Financial Planning thinks that just getting your 401(k) match isn’t enough.
“I see many folks saving the 6% that gets them the maximum company match in the 401(k); however, 6% is not enough,” Barfield said. “A savings rate of 15% or more should be the starting point for someone looking to retire in their mid-60s, and that number should be 25% or more for anyone with aspirations of retiring early.”
Setting a percentage goal is a great way to set aside retirement savings and prioritize it in your budget. A 401(k) is a great way to do this, too, and you can quickly select the amount you want to save — it happens automatically.
Larson Patty from Rothman Investment Management gives a simple four-part framework for retirement planning:
- “Create a financial plan or partner with a financial advisor to help you create a financial plan.
- Track your spending to confirm where your resources are going.
- Pay your future self first. Allow your expenditures to lag your income and invest the difference.
- Start early. The earlier you start saving for retirement, the fewer dollars you need to defer over your working life to achieve the same end result. Regardless of how old you are, the best day to start planning and saving is today.”
Saving for retirement is a must. Many Americans are simply behind, but that doesn’t mean they can’t catch up.
If you still have time to save, you can make a huge impact on your retirement savings by starting right now. Simply committing to set aside a percentage of your income into retirement can give you an advantage by the time you reach retirement age, but you need to start right now.
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