45% of working-age households don’t have any retirement assets, according to the National Institute on Retirement Security (NIRS), a non-partisan research institute that promotes defined benefit pension plans. They also found that about 66% of Americans over 55 have less than a year of annual salary in retirement savings.
The NIRS calls this a retirement security crisis, and it’s easy to understand why. Beyond the numbers above, they say that 84% of Americans are behind their targets on saving for retirement. There are groups the disagree with these numbers, the Rand Corporation’s Michael Hurd and Suzanne Rohwedder say that 83% of married couples and 70% of single people are on track for their retirements.
Still, most people agree that Americans should be saving more for retirement.
So how much?
Fidelity, the big Mutual fund broker and financial institution estimates that a person retiring at 65 will need to save 12 times their pre-retirement income. That’s based on a lot of factors, such as estimating that you’ll need 85% of your pre-retirement income per year through your retirement, and what kinds of pensions and other kinds of investments are available.
The biggest factor is right there in the first line of the previous paragraph though: when you plan on retiring. If you delay your retirement for a few years, until 70, Fidelity reduces their estimate to 8 times what you make in a year.
Many Americans are now delaying their retirements, and in a 2016 survey by the Transamerica Center for Retirement Studies, a majority (51%) now say that they plan on working during their retirements.
Suggestions:
You really don’t want to be working during your retirement if you can avoid it, or you don’t if you’re a normal person, so here are some suggestions on what you can do to improve your financial position.
- Contribute what you can every year to your employer provided retirement plans, up to the max, especially if your employer provides a match.
- If you get a bonus, or other unexpected financial windfall, try to put it in an IRA (Traditional or Roth). The yearly max is $5,500 or $6,500 if you are age 50 or older.
- If you’ve got anything left after the first two, think about contributing to a health savings account (HSA). These are used to offset medical expenses like deductibles and such. Their yearly max is $3,400 or $4,400 for people 55 and older.
As dull as accountants can be, it is really important to think about this stuff because it can have a huge impact on your life someday in the future. Unusually, Tardy & Co., PC, isn’t particularly dull, but we’re good at what we do and we can help you plan for the future just as well as a stodgy firm could.