We think that retirement is a moment of relaxation and carelessness in our lives where we can do what we want, but for many Americans who work today, retirement will be more of a nightmare than a dream. One study at a time showed that many Americans are far behind their retirement savings, and if they do not take the necessary steps today, they may run out of money or work a lot. longer than expected.
Here are some of the most shocking statistics on retirement savings for Americans and tips on how to get yours back on track.
1. One in three Americans has less than $ 5,000 in retirement savings
A Northwestern Mutual study found that one in three Americans saves less than $ 5,000 for retirement and that 21% of them have none. Whatever the reason for their lack of savings, the result is the same. When they start saving, these people will have to put aside more of their income each month to have enough money for retirement, because their savings will have less time to accumulate before to start profiting from it. Alternatively, these workers may need to stay in the job market a little longer than expected.
2. The median retirement savings of households is $ 50,000
According to Transamerica's latest pension survey, the median retirement savings for all households in the United States is $ 50,000. This figure is higher for older generations, baby boomers with a retirement savings average of $ 152,000 and generation X a median of $ 66,000. Millennials currently have the lowest median retirement savings at $ 23,000, but they also have the most time to save before retirement.
3. Americans leave $ 24 billion of unclaimed matches (401) on the table
A 401 (k) Employer Match is free money that you can apply to your retirement, so you do not have to spend your hard earned money. But many Americans choose not to enjoy it, resulting in $ 24 billion in unclaimed games each year (401), according to Financial Engines. The survey indicates that the typical employee loses $ 1,336 in free money each year, which could be close to $ 43,000 with a 20-year capitalization.
4. 29% of Americans made early withdrawals from their retirement accounts
In times of crisis, nearly 3 in 10 Americans draw on their retirement savings, according to Transamerica. Common reasons for borrowing 401 (k) or withdrawing hardships include debt repayment, unplanned medical expenses and funding for graduate studies. These withdrawals can help you through a difficult time, but they also hinder the growth of your retirement savings, and you could pay penalties on these distributions if they are not motivated. You'd better put aside money for emergencies in a separate emergency fund. Aim for three to six months of living expenses.
5. 46% of Americans only guess at how much money they need for their retirement
Nearly half of the workers surveyed in Transamerica's last retirement study agreed that they figured out how much they needed to save for retirement. Only 12% had used a retirement calculator or spreadsheet to help them get an accurate estimate. Generation X and baby boomers estimated that they would need about $ 500,000 for their retirement, while the millennials would need only $ 400,000. But both estimates may be too low. A MetLife study estimated the average cost of retirement at $ 738,400 and it is not unreasonable to think that you will need $ 1 million or more if you live in a place where the cost of living is high .
How to consolidate your retirement savings
If you are one of the 46% to guess the amount of your retirement savings, it's time to develop a real plan. Start by estimating how much time you expect to live and calculate high. According to the Social Security Administration, one in four 65-year-olds will live past 90 years old today and one in 10 will live beyond 95 years. Subtract the age at which you plan to retire to obtain the estimated duration of your retirement.
Then, estimate your annual living expenses at retirement and multiply them by the number of years of your retirement, adding 3% per year for inflation. A retirement calculator will do this calculation for you. Once you have your estimated total cost of retirement, subtract from this amount any amount you expect to receive from pensions, Social Security or 401 (k) employer equivalents. You can estimate your social security benefit by creating a My Social Security account. The remaining amount is what you need to save on your own. Your calculator should also give you an estimate of what you need to save per month to reach your goal.
The next step is to open retirement accounts if you do not already have them. Your employer can offer a 401 (k). Start here, especially if your business matches some of your contributions. If your company does not offer a 401 (k), open an IRA instead. Traditional IRAs being tax free, they reduce your taxable income this year, but you pay taxes on your retirement distributions. The Roth IRAs work in the opposite direction. You pay taxes on your initial contributions, but no tax on distributions at retirement. Traditional IRAs make more sense if you believe you are in a higher tax bracket today than you will be retired, while Roth IRAs make more sense if you think you are in the market today. same slice of taxation or in a lower tax bracket today retirement.
Try to contribute as much as your retirement calculator recommends it every month, or more if you want an extra cushion. If you can not save as much now, save as much as possible and try to increase your contributions by 1% of your salary each year. Avoid early withdrawals, even if you have a valid reason, such as a first purchase. Save for these and emergency expenses in a savings account.
The above statistics on retirement savings Americans are disastrous, but you can surpass the odds by creating a solid retirement plan, by diligently saving up and taking advantage of the 401 (k) employer match available.