Retirement Savings: 20% Say They’ll Never Retire. 5 Things To Do Now To Turn That Around

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Saving enough for retirement is a significant worry for many Americans — some feel they’ll never catch up. 

Nearly half of Americans planning for retirement say they’re behind on their savings to retire at their ideal retirement age, a recent survey from MassMutual’s Consumer Spending & Saving Index found. One in five say they don’t plan to retire at all. 

Retirement comes with plenty of unknowns — it’s hard to predict precisely how much you’ll need to retire. Knowing what the future will bring regarding your health or career is also challenging. In some cases, you may be forced to retire or unable to keep working as you want to. 

You can help avoid a bleak retirement outlook by making a plan now. Even if you feel far behind on retirement savings, there are steps you can take right now to help get your savings back on track.

Why Aren’t Americans Saving Enough For Retirement?

The average retirement age in America is 65. But many Americans don’t expect that to be their reality. Many workers are delaying retirement to save more through working.

According to the same MassMutual survey, two-thirds of respondents believe the ideal retirement age is between 60 and 69, with over half expecting to retire around that age (53%). A different Employee Benefit Research Center survey found that one-third of workers plan to retire at 70 or older (or not at all). 

Why do most Americans not feel like they can retire? Most don’t feel like they can afford to stop working. 

Among those already retired, only 43% say their retirement savings are about what they need. Around one in five (21%) say they have more than they need, while 29% say they have less. In other words, there’s a gap between how much Americans think they may need to retire and how much they actually end up with. 

No matter how far behind you feel in your retirement savings, there are a few ways to catch up and retire at your desired age.  

1. Calculate an Accurate Retirement Number

Predicting how much you’ll need in retirement is challenging. To figure out your target retirement savings number, you should look at factors like 

• Lifestyle in Retirement: Factor in housing, food, transportation, and healthcare costs. Consider the type of lifestyle you want to live in retirement and what your discretionary spending may look like, including travel or hobbies. 
• Retirement Duration: While you can’t predict how long you’ll live, you can make an educated guess. Consider your current health status and your family’s history to help determine how long your retirement may last. 
• Inflation: Inflation can eat into your retirement savings and reduce your purchase power over time. Inflation does fluctuate, but your annual costs will rise between 2%-3% each year due to inflation. 
• Investment Returns: The stock market has yielded an average annual return of 10%, but that number can fluctuate widely. 
• Social Security: Factor any benefits you expect to receive from Social Security. 

Plenty of online calculators can help you estimate how much to save. Remember, it’s better on being conservative and save too much than not having enough saved. 

Having a North Star number to work towards will help you stay motivated. Reviewing and adjusting your target annually is a good idea based on any changes in the economy or your plan. 

2. Boost Your Retirement Contributions 

If you have a 401k or IRA account, increase your regular contributions, even by small increments. Ideally, you would contribute the maximum limit, but any amount is better than nothing at all. 

If you receive a raise, bonus, tax refund, or any other windfall, consider putting that toward retirement savings as well. 

Automating increases to your contributions each year is a simple and easy way to make progress and increase your contributions over time. Even an extra 1% more invested annually can make a significant difference over time, thanks to compounding interest. 

3. Cut Back on Expenses Where You Can 

Saving enough for retirement may require adjusting your lifestyle. Take a close look at your budget and expenses and identify areas to cut back to free up more money for retirement. 

Some changes may be more minor, like deleting old subscription services or using coupons at the grocery store, to larger money moves, like downsizing your home or reducing the number of cars you own. Typically, the larger the expense, the more money you’ll save that you can put towards your retirement savings. 

You can also eat out less and cook more, bundle your home and car insurance, and invest in energy-efficient appliances. All of these actions can help you save money.

4. Invest More Aggressively 

While there’s no guarantee that your investments will perform better in the market, if you have years until retirement, you may want to shift your portfolio to a more aggressive position to capture potential gains. 

Review your asset allocation and consider moving to a more growth-oriented mix of stocks and other higher-return investments. The longer your time horizon until retirement, the more risk and volatility you may be able to tolerate.

It’s also a good idea to minimize your use of tax-advantaged retirement accounts like 401ks and IRAs as much as possible first, then invest additional funds in a diversified, taxable investing portfolio. You may want to consider low-cost investments like index funds, which come with lower fees. 

Taking Back Control of Your Retirement 

No matter how old you are or how little you feel like you’ve saved, it’s still possible to progress toward retirement. That way, you can choose to work instead of feeling forced to work during your golden years. By following regular savings and spending habits and sticking to your retirement plan, you can pad your nest egg and have the flexibility to retire when desired. 

Consistently making small, smart money moves today will compound over time and can ultimately put your retirement goals back within reach.

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