Are You Saving Enough for Retirement?
October 10, 2016
Saving enough to live comfortably in retirement is all up to you. And for too many Americans, you’re falling short, financial experts say.
Read more: The Retirement Planning Tool Kit
Forty-eight percent of workers age 55 or higher and nearing retirement age have saved less than $100,000 for retirement, according to the Employee Benefit Research Institute. For a third of workers, they’ve saved less than $25,000.
Don’t bank on Social Security. It only replaces 39 percent of pre-retirement income for the average worker retiring at 65, according to the Center for Retirement Research at Boston College.
For those without enough, The New York Times recently published an article on how you can play catch-up with your retirement savings.
For one, the message Michael Kitces, director of wealth management for Pinnacle Advisory Group, wants to send: It’s never too late to start saving. Case in point, a person who saves 30 percent of a $100,000 salary at age 51 could potential save up to over $1 million by age 65.
Kitces, publisher of the financial advice blog Nerd’s Eye View, suggests creating a household budget of all expenditures while you’re still paying for your children’s needs. Then, once the children are out of the house, reallocate that spending on retirement savings.
Maximize savings contributions in a workplace 401(k) account, if you have one, or an IRA. For those over the age of 50, limits on tax deferred savings for 401(k) accounts is $24,000 and $6,500 for IRA’s.
Also, financial experts say one of the best pieces of retirement savings advice: Keep working longer. They urge households to wait to file for Social Security. Benefits can be claimed as early as age 62 but the longer you wait, the more you’ll gain. The monthly benefits rise 8 percent for every year that you wait.
“There’s nothing you can put your money into today that will create a better rate of return,” says David Blanchett, head of retirement research at Morningstar. However, nearly half of workers file at age 62.
Also, don’t underestimate the benefit to downsizing. Moving to a smaller home or relocating to a less expensive home in a metro area for those approaching retirement can be a smart move, financial experts say. They can take out the equity from the home sale and then invest it to produce income, Kitces says.
Source: “How to Improve Your Retirement Income if You Haven’t Saved,” The New York Times (Oct. 7, 2016)
Updated: June 04, 2020