Retirement Savings: Think You’re Behind? See the Latest Numbers and Find Out How To Catch Up
Do you know how much the average American has in retirement savings? In a GOBankingRates survey polling 1,005 Americans, the amount the majority has saved is far from the $1 million often quoted as the retirement savings goal.
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Let’s take an in-depth look at the amount Americans are saving for retirement. We’ll also review strategies for how to get your retirement savings on track if you think you’re falling behind and would like to catch up.
Breaking Down Retirement Savings for Average Americans
Only 1% of overall Americans surveyed by GOBankingRates said they have $1 million in their retirement savings. The age range hitting this million-dollar mark the most are those ages 65 and over at 5%.
Currently, 26% of overall Americans have $10K or less saved for retirement. This includes those ages 18 to 24 at 30% and ages 25 to 34 at 34%. Women, at 24%, are also less likely to have $10K in retirement savings compared to men at 28%.
The highest percentage of overall Americans, at 36%, have not even started saving for retirement. According to the survey, 47% of those ages 18 to 24 do not have retirement savings. This is also an issue facing other generations with 40% of those ages 35 to 44 and 44% of ages 45 to 54 lacking any savings for retirement.
A disproportionate amount of women (43%) are also impacted by a complete lack of retirement savings compared to men (28%).
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How To Catch Up on Saving for Retirement
If you feel like you’re behind on saving for retirement, there is good news. You can start catching up as soon as today. Take the following steps now to ensure you’ll have savings and enough money to last you during retirement.
Find Creative Ways To Reduce Your Expenses
If you feel like you’re running behind on your retirement savings, play catch-up by considering ways to reduce your expenses.
John Campbell — East region head of wealth planning at U.S. Bank Private Wealth Management — recommends increasing your deductible on homeowners and auto insurance as well as taking other expense-reduction measures.
See if Your 401(k) Has a Roth Provision
The general rule of thumb for those who have a 401(k) is to max out your contributions, especially if these contributions are matched by your employer. Chris Burns, financial advisor at Burns Estate Planning, recommends reviewing your 401(k) to see if you have access to a Roth provision option.
If you do and you can contribute to it, Burns said do it. “The money inside the Roth 401(k) will grow like it would in a traditional 401(k), and as long as you follow the rules, it can provide you with tax-free income in retirement.”
Open and Max Out a Roth IRA
Many Americans surveyed by GOBankingRates are much younger than 40 and do not have retirement savings. These individuals are recommended to open a Roth IRA and contribute the maximum amount to this account. The Roth IRA contribution limit for those under age 50 is $6,000 in 2023.
“I recommend people consider putting money into Roth IRA to minimize their tax liability in retirement,” said Burns. “In retirement, would you prefer a lot of money in a traditional IRA, which is taxable, or the same amount of money in a Roth IRA, which you can withdraw tax-free?”
Create Tax-Diversified Sources of Income
It’s beneficial for those saving for retirement to create a mix of pre-tax and post-tax vehicles. These may include a traditional 401(k) or traditional IRA, plus a Roth 401(k) and/or Roth IRA. Having these tax-diversified sources of income can help retirees avoid paying a significant amount in taxes when they take distributions.
Campbell also recommends using a health savings account (HSA) as a retirement account. “These use pre-tax dollars,” said Campbell. “You can take them with you if you leave your job, and they grow tax-free.”
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