Apparently, everywhere you look, financial experts lament the fact that most people do not save enough for retirement. But the truth is that most Americans – even those nearing retirement age – are not doing enough to prepare for this new stage of their lives. In fact, half of US adults over 55 have saved nothing for retirement, according to a recent US Accountability Office report.
If you have trouble saving for the future, you can simply choose to work longer to catch up. If you decide to go this route, you are not alone; According to a report published in 2018 by the Transamerica Retirement Studies Center, 53% of Americans plan to work after the age of 65, and 13% intend never to retire.
This is not necessarily a bad idea on the surface. After all, if you do not have much (or nothing) saved, early retirement is probably not the wisest choice. However, according to a separate Transamerica survey, 56% of those who have already retired at age 63 reported having been forced to retire early. In other words, even if you want to work longer to make up for the lack of savings, you may not be able to do it.
The reasons for unplanned early retirement vary. You may have to leave your job for health reasons, for example, or you have been the victim of a series of layoffs without being able to find another job. But if you depend on your ability to work until the end of your sixties, or even at age 70, early retirement can reduce your chances of saving enough to be able to retire comfortably.
What to do if you are off piste
If you are late on your savings, do not wait another day to start catching up. It is never too late to start saving, and although you probably can not retire from a millionaire, even a little hidden money is better than nothing.
Because of the compound interest, time is definitely your friend when it comes to investing. With compound interest, the longer your savings, the more you'll save in a snowball. You essentially earn interest on your interests. So the sooner you start throwing money into your retirement fund, the less effort you will need to generate significant returns.
For example, suppose you are 40 years old and nothing is saved for retirement. You are just starting to save $ 200 a month, an annual rate of return of 7% on your investments. After 25 years, you would have about $ 152,000. If you are late saving up to 50 years and save $ 200 a month, you would only have $ 60,000 saved at age 65. If you end up being forced to take early retirement, your savings may not be & they would like them to be.
If you feel that you have no spare currency to save at the moment, it's time to take a close look at your budget. Chances are that even if you run out of money, there are still some areas in which you can make cuts. For example, try to carpool or bike several times a week to save on gas or cut the cable and use cheaper streaming services.
Suppose you have pinched every penny you can find and that still does not represent much. If this is the case, you may need to take more drastic action. Try to take some time and spend all of your income on retirement, or even consider downsizing in a cheaper home to save on your mortgage or rent each month.
Small changes add up with time
It may feel like you're saving a few dollars here and it makes no difference. But the best asset for saving sooner than elsewhere is that even small savings can be added if you have enough time to grow.
For example, suppose you can reduce your grocery bill by $ 20 a month by using coupons, that you save $ 20 a carpool per month, that you reduce your cable bill by $ 50 a month and that you save 50 dollars more. a month bringing your lunch to work every day rather than eating out. It's $ 140 a month here. If you take more drastic measures by finding lateral agitation or reducing the size of your home, you could save hundreds more per month.
In addition, if you have access to a 401 (k) that provides matching contributions to the employer, take full advantage of it – this could potentially double your savings. Suppose, for example, that you are 40 years old and currently save $ 140 a month, and that your employer pays the entire amount, bringing your total savings to $ 280 a month. If you make an annual return of 7% on your investments, you will save about $ 213,000 at age 65.
When it comes to savings for retirement, the bottom line is that it is important to save as soon as possible and not to assume that things will become easier with age. Making some lifestyle adjustments now may not be what you prefer, but it is much easier to save a little now than having to make major sacrifices afterwards.