Are you sure you’re ready to retire? Are you certain? A new study by the Transamerica Center for Retirement Studies suggests that, even though 73% of American employees believe they are on pace for a comfortable living in retirement, their savings data may present a different image.
According to experts, the typical rule of thumb is to replace between 60 and 80 percent of your pre-retirement income to maintain your existing standard of living in retirement. Using this as a baseline, often different for each individual, most households today are under-saving.
Americans are unprepared for retirement.
The anticipated median retirement savings for workers is $93,000, with baby boomers (born between 1946 and 1964) reporting a total of $202,000. According to some calculations, this sum is likely insufficient to restore lost revenue.
And many believe they do not earn enough to adequately save. According to official data, the average yearly pre-tax income of American households is $87,432. Extend this over 30 years, and you can understand why, based on current income levels, some experts recommend saving at least $1.5 million for retirement. According to the survey, however, 40% of baby boomers, 48% of Generation X, 49% of Millennials, and 55% of Generation Z employees do not believe they have enough money for retirement.
According to Anthony Colancecco, a certified financial planner with Ballentine Capital Advisors in Greenville, South Carolina, one method to overcome this is to create a formal financial plan that eliminates ambiguity. They will no longer have to estimate what they will need in retirement; instead, they will have a concrete strategy with real cash at risk to establish what they will need in retirement and how to obtain it.”
A financial planner at Allied Financial Advisors, Chris Lyman, says that while uncertainty isn’t the end of the world, not being able to save for the future means something needs to be changed. The greatest thing you can do if you are not saving enough is to develop the discipline of budgeting and allocating funds to pay off non-mortgage debt first, build up an emergency fund, and then start saving for long-term goals like retirement, Lyman advises.
And don’t postpone it: It’s simple to say, ‘I’ll get to it tomorrow,’ but you never do, Lyman adds.
The negative impact of debt on retirement funds
According to the survey, debt is a factor that exacerbates Americans’ saving troubles across almost all age groups. In light of employees reporting an average credit card debt of $5,221 over the past year, it’s easy to understand why 49% believe their debt prevents them from saving for retirement.
According to Lyman, creating a budget and reducing non-essential expenditures is one strategy to tackle these concerns. Making a grocery plan and adhering to it, meal prepping to avoid spontaneous door rush meals, and reviewing all of your subscriptions to determine which ones you do not use and can cancel, Lyman advises.
Many Americans lack the information basis to invest intelligently for retirement.
Diversification is among the most critical aspects of retirement planning. But with less than four in ten workers professing to comprehend its fundamental concepts, there may be cause for alarm, according to Lyman. Your asset allocation is the second most critical determinant in predicting your wealth level, after your tendency or capacity to save, says Lyman.
Colancecco says that one feasible solution is to overcome the education gap and collaborate with a financial specialist. A good financial adviser can help you see the big picture when it comes to saving and investing, he said, adding that in addition to their knowledge, they often have access to a greater selection of investments. Working with a financial counselor makes it possible to invest in these choices and earn possibly more significant returns.
Too many of us delay serious retirement planning for too long.
So, you’re prepared to begin saving but haven’t gotten around to it yet? You are not alone, according to Transamerica research. Lyman noted that nearly four in ten workers intend to delay retirement planning until they are closer to their actual retirement date, which may provide apparent concerns.
One of the best ways to save if you are not saving enough is to budget and allocate funds to pay off non-mortgage debt first, establish an emergency fund, and then start saving for long-term goals such as retirement. The method is simple but challenging to follow since it needs the discipline to compel a lifestyle change, Lyman explains.
He continues beginning modestly can help generate momentum toward this impossible objective. Simply contribute an additional $20, $50, or $100 monthly to reduce debt and accumulate assets. This might generate a snowball effect in which you repeatedly save more money and gain momentum.