Americans aren't doing a good job when it comes to retirement planning. In fact, about one in three adults has $0 saved for retirement, found GOBankingRates' 2017 Retirement Savings survey. Another 21 percent of Americans have less than $10,000 saved. That means more than half of Americans don't have enough set aside to cover expenses for even one year in retirement.
To find out why so many people have so little saved, GOBankingRates conducted a follow-up survey. We asked adults across the U.S. whether they had retirement savings. Those who responded "No" were then asked the following question: "Which of the following is the main reason you do not have any retirement savings?" Respondents could select one of the following options:
- My employer does not offer a retirement savings plan
- I had to use the money early for a financial emergency
- It is not a priority for me
- I won't need any retirement savings
GOBankingRates analyzed the overall results to find the key reason why people aren't saving. We also examined whether the reasons varied across age groups, and between men and women. Here's a look at why Americans aren't saving enough for retirement — and tips on how you can save more money for retirement.
2 in 5 Americans Aren’t Prioritizing Saving for Retirement
The most common reason survey respondents gave for not having any retirement savings is, "It is not a priority for me." About 40 percent selected this option, which suggests everyday expenses are likely taking priority over saving for the future.
"We're so focused on today," said Tom Zgainer, CEO of America's Best 401k, a workplace retirement plan provider. As a result, many people aren't thinking about how they'll be able to cover their expenses in the future when they stop working. "It's astounding that we're not thinking forward," he said.
The second most common response also shows a lack of foresight. Nearly 22 percent of respondents said they have no retirement savings because they raided their accounts for a financial emergency. It's not surprising, though, that so many had to tap their retirement funds to cover emergencies. Another GOBankingRates survey found that one-third of Americans have $0 in a savings account — which means they likely don't have cash saved for emergencies.
Lack of access to a workplace retirement plan is also a big reason many Americans don't have savings. Almost 19 percent of survey respondents said, "My employer does not offer a retirement savings plan." But the fact that they don't have any retirement savings suggests they might not be aware there are several ways to save for retirement without a 401k, including a traditional IRA and Roth IRA.
The least common reasons for not having retirement savings are "I won't need any retirement savings" and "Other," with both getting about 9 percent of the responses. Those who answered "other" were allowed to offer their own reasons, some of which are as follows:
- I'm a student
- I don't earn enough to set any aside
- No job
- Waste of time
- 2008 collapse
- I am disabled
- I'm lazy
Sound Familiar? 9 Excuses You're Making to Avoid Saving for Retirement
Millennials and Gen Xers Most Likely to Not Prioritize Retirement Savings
Based on these survey results, it seems as if many younger adults haven't started their retirement planning because it's not on their list of priorities. In fact, the top reason all millennials and Gen Xers said they are not saving for retirement is because it's not a priority. However, young Gen Xers ages 35 to 44 are more likely than any other age group to pick this reason. Nearly 43 percent of this age group said saving is not a priority compared to:
- 33% of young millennials ages 18 to 24
- 41% of older millennials ages 25 to 34
- 33% older Gen Xers ages 45 to 54
- 17% of baby boomers ages 55 to 64
- 13% of seniors ages 65 and older
Young Gen Xers are also the most likely among all age groups to say they don't have retirement savings because their employer doesn't offer a retirement plan, with nearly 43 percent choosing this reason as well. On the other hand, older Gen Xers are much more likely to have depleted their retirement savings for a financial emergency than their younger counterparts, at 33 percent versus 10 percent, respectively.
This survey also found:
- Older millennials are the least likely to say they don't have access to a workplace retirement plan, with about 16% citing this reason for having no savings.
- Young Gen Xers are the only age group where none of the respondents cited, "I won't need retirement savings," as their reason for not saving for retirement.
- Young Gen Xers are also the least likely age group to have depleted their retirement savings for a financial emergency.
Boomers and Seniors More Likely to Tap Retirement Savings for Emergencies
The top reason adults 55 and older said they don't have any retirement savings is because they already used the money for a financial emergency. Nearly 48 percent of boomers ages 55 to 64 chose this option, and 40 percent of adults 65 and older cited this reason.
Although there are legitimate reasons to dip into your retirement fund early, withdrawing money from certain retirement accounts before age 59 ½ can come with a big cost. You'll have to pay federal income taxes on the amount withdrawn and a 10 percent early withdrawal penalty. Plus, you give up compound interest on retirement savings by not leaving your money in an account to grow.
To avoid raiding your retirement savings, adults nearing retirement need to set aside cash for emergencies. "Put aside everything you can to create an emergency fund," said Frank O'Connor, vice president of research and outreach for the Insured Retirement Institute. In fact, saving for emergencies should be a priority.
Men More Likely Than Women to Say Saving Isn’t a Priority
Half of the men surveyed said they have no retirement savings because saving isn't a priority for them. In comparison, only 32 percent of women gave this answer. Men are also more likely than women to say that they haven't saved any money because they won't need retirement savings.
Women, on the other hand, are more likely than men to have tapped their savings for an emergency at 26 percent versus 17 percent, respectively. They are also more likely to say they don't have retirement savings because they don't have access to a workplace retirement plan. About 22 percent of women and 14 percent of men answered, "My employer does not offer a retirement savings plan."
But again, there are ways to save for retirement other than a 401k or similar workplace plan. For example, you can set aside up to $5,500 a year in an IRA and get a tax deduction for your contribution. Or, you could open a Roth IRA and contribute up to $5,500 a year. You won't get a tax deduction for your contribution, but you can withdraw the money tax-free in retirement.
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.