A survey completed this year shows that only 32 percent of Americans say they’re confident about having enough money saved to retire by their desired retirement date.
Nerd Wallet completed the survey in June 2018 of 2000 adults in the United States. The figures reflect their current rate of saving. The result could lead to a less than optimal retirement.
This feeling is probably sensible since many people have not prepared well for life after work. The average retirement savings is $84,821. A third of Americans say they have less than $5,000 saved. Baby boomers are the first generation where many people will not receive a pension from work during retirement. Boomers are reliant on the accidental retirement vehicle – the 401(k). These accounts were never designed to be the main income source, but they became so by default.
Previous generations often worked at one company their entire career. They would work 30 to 40 years and receive a pension. These workers would retire at 65 and start Social Security and Medicare. These things and their pension would all kick in at the same time. They also tended to have less debt then retirees today.
Boomers have lived their lives wanting more and not hesitant to incur debt. They have purchased more autos, wanted bigger houses and exotic vacations. These desires have restricted the ability to save for retirement.
The question becomes what can you do to have the retirement you desire? For younger workers it is a matter of earning more and spending less. Make sure you are participating in your 401(k) if available. You always want to contribute enough to maximize any employee match. It is hard to beat free money. This is probably not enough to enjoy the retirement you desire. You probably should be saving at least 10 percent of what you earn. If you want a better retirement you need to save even more.
In 2018, you can contribute up to $18,500 in a 401(k) if you are under age 50. You can contribute up to $5,500 to a Roth or regular IRA. After age 50, you may be able to contribute some extra catch up contribution. Have your employer automate your contribution so that you don’t forget to make them. Also, up your contributions each year when you get a raise. Remember, you are responsible for your own retirement savings.
If you are closer to retirement age, you need to do the things above and look for additional ways to improve your projected retirement. This might include maximizing Social Security, working longer or working part time during retirement.
All ages should strive to pay off debts. Parents must be careful when taking out student loans for their children. There are multiple ways to finance college, but you cannot borrow to finance retirement. Be careful of borrowing money close to retirement for major home repairs. This may impact retirement. You also do not want to be carrying a balance on high interest credit cards.
Make sure that your investment risk matches your timeline and risk tolerance. You do not want to have a market correction right before or after retirement started. This sequential risk could wipe out your retirement savings.
Plan for retirement don’t let it just happen. You will be rewarded for years to come.
This article provided by NewsEdge.