You can not believe that many elderly Americans have not spared anything for their retirement – The Motley Fool



Workers are generally informed that they will need 70% to 80% of their final income each year to live comfortably in retirement. The logic is that since most of the costs of living remain the same in retirement and some even increase (such as health and recreation), workers need to replace the essentials of their previous paychecks. But data from the Inssured Retirement Institute tells us that a large portion of older workers are not close to achieving this goal and that 45% of baby boomers have no savings for retirement.

Of course, savings are only a potential source of income at retirement. Other options include social security, income from part-time work or paying a pension from a former employer. This last point, however, is not something that most seniors can count on.

Only 23% of workers aged 56 to 61 expect to earn a pension income, while only 38% of older boomers say the same thing. And while social security can help older people to cover some of their expenses, these benefits are by no means sufficient to live.

Senior man with arms around the senior woman are both sitting in front of someone at a table.

SOURCE OF IMAGE: GETTY IMAGES.

For an average employee, social security will replace about 40% of his former income. And while it is not so bad when there are other sources of income involved, people without savings or pensions perceive a rather bleak image.

If you are approaching retirement without money, you must start saving immediately. Otherwise, you may find yourself short of money and miserable at a time in your life where you deserve better.

Repair the lost time

Whether you have neglected your savings because of mismanagement of your money or because you mistakenly think that you can cope with social security, consider this an awakening to start doing better. First, review your budget or create one if you do not have one, and identify ways to dramatically reduce spending to free up money. This could mean reducing your living space, giving up a car without which you could technically live, or limiting meals in restaurants and recreation.

At the same time, you may want to consider getting a second job in addition to your main job in order to obtain additional funds for your IRA or 401 (k). Of the millions of Americans known to threaten, 14% do so for the sole purpose of being able to build a chasm.

How much should you seek to save each year? Ideally, as much as you can. If you are 50 years old or older and have access to a 401 (k) plan through your work, you can save up to $ 25,000 a year. If you do not have a 401 (k), your best option is to maximize your IRA at $ 7,000 this year, but to supplement that savings by placing money in a non-retirement account (such as a savings account). traditional brokerage).

From there, it is imperative that you invest your savings for additional growth from here retirement. If you are about to accumulate shares (which you should be comfortable with if you have a savings window of 10 years or more), there is a good chance that your investments will generate an annual return. average of 7%, which is actually a little lower than the index. the market average. Therefore, if you can reach a maximum of $ 25,000 per year for the next 10 years, you will get $ 345,000, assuming an average annual return of 7%.

Of course, going from saving anything to a maximum of 401 (k) is a big problem, so let's use a more realistic figure – $ 800 a month. Save that for 10 years and you will have about $ 133,000 for retirement, assuming an average annual return of 7%. This is not a ton of money, but if you save so much and start working part – time as a senior, you may be able to get by.

One last thing: if you are already over 50 and you do not have a lot of savings, it is good to think about delaying your retirement as long as you can. This will give you a few extra years to spare, while leaving your existing savings intact for longer. Postponing retirement may also allow you to not claim Social Security beyond your retirement age, which means that your benefits will be increased. And if you plan to retire without too much savings, raising another income is certainly a good idea.


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