The COVID-19 pandemic has brought a hard reality to light: many Americans are not adequately preparing for retirement. In a survey by FinanceBuzz, 27% of Americans have decreased or stopped their retirement savings, and 9% have actually dipped into these savings during the pandemic. Furthermore the survey shows that 21% haven't started saving, including 20% of millennials, of whom 44% cite student loan debt as the reason they're unable to save.
The lack of planning for the so-called “golden years” varies by age, with older Americans (Boomers and Gen X) more prepared than their children (millennials and GenZ), but still not prepared enough. According to financial experts, a person should have at least 10 times their salary saved by age 60 for retirement purposes. Yet, a report from the Economic Policy Institute says that nearly half of U.S. families have no retirement savings. And according to a recent Federal Reserve report, the median retirement savings is $60,000 among all U.S. adults. Of course while some older Americans have literally no retirement money in the bank, many are more than prepared, which is why the median is a good indicator of all Americans.
The message is clear: start saving for retirement if you haven’t already. And if you have, increase your savings any way you can. Don’t rely on Social Security: it should be viewed as supplemental, not a primary source of income for retirees. Here are some ways to boost your personal retirement savings and ensure that you have income for your latter years:
Start Saving Early
The earlier you begin saving for retirement, the less you will have to save on a per-year basis. Most financial planners recommend that you start saving 10 to 15% of your income, beginning in your 20s. If that’s too much, consider raising the percentage as your income rises over the years.
Save a Little Extra
Increasing your contribution rate to a retirement account from 4 to 6%, for example, can add over $100,000 over 30 years, assuming a $50,000 average salary. In addition, if you get a surplus of money in the form of a bonus or tax refund, put away some—or even all—of the funds toward retirement savings rather than an immediate splurge.
Participate in Your Employer’s 401(k) Plan
Most employers offer 401(k) plans, and many offer to match a portion of the money your invest. In addition, the funds you invest are tax-free until you withdraw them. If you're not already participating, be sure you start, and if you are, consider investing in the maximum amount allowable to boost your retirement savings.
Consider an IRA
All money saved in a Roth IRA is after-tax, so if you make the contribution while your tax rate is low, you will be able to withdrawal the money upon retirement tax-free. Contributions to a traditional IRA, on the other hand, are tax-deductible upon contribution and may make more sense according to your current tax bracket. Consult with a financial advisor to figure out which option is best for you.
These are just some of the ways you can increase your retirement nest egg and begin to have more control over your financial future. The goal is to be able to retire with at least enough funds to maintain your current standard of living. Do whatever is within your means, especially if you are younger, so that you won’t have to face retirement without adequate savings. Retirement may seem like a long way off, but it requires a significant amount of savings if you don’t want to be caught in financial uncertainty.
Not sure where you stand? Schedule a free consultation with one of our financial advisors.†
†Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Hanscom Federal Credit Union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Hanscom Investment Services, and may also be employees of Hanscom Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Hanscom Federal Credit Union. Securities and insurance offered through LPL or its affiliates are:
Not Insured by NCUA or Any Other Government Agency / Not Hanscom Federal Credit Union Guaranteed / Not Hanscom Federal Credit Union Deposits or Obligations / May Lose Value
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