Are You Behind on Your Retirement Savings?
Many people worry that they haven’t saved enough for retirement. But what does it really mean to be “behind”?
A recent Bankrate survey found that 56% of American adults in the workforce feel behind on their retirement savings, with 37% saying they feel “significantly behind.” Additionally, nearly a third of respondents said they would need $1 million or more to retire comfortably.
So, how do you know if you’re actually behind on your retirement savings? And what can you do to catch up?
Use Online Tools for Comparison
One reason why adults may feel behind is because they haven’t reached certain financial goals they’ve set for themselves. Certified financial planner Lazetta Rainey Braxton suggests using online calculators to determine how much you might need for retirement, taking into account both current and future expenses, such as healthcare costs. For example, Fidelity estimates that the average retired couple will need around $315,000 for healthcare expenses in retirement.
Brokerage firms like Fidelity and T. Rowe Price provide benchmarks to help guide your retirement savings. These benchmarks set age milestones and target savings goals based on your current salary. For example, Fidelity recommends having twice your starting salary saved by age 35 and 10 times your starting salary saved by age 67.
The Importance of Specific Information
Comparing yourself to these benchmarks can be stressful, especially if you’re near retirement and realize you need to save more. However, having specific information about your retirement savings is better than having no information at all, according to Christine Benz, director of personal finance and retirement planning at Morningstar.
The Bankrate survey found that Generation Xers and baby boomers feel the most behind on their retirement savings. This is likely due to the fact that they have less time to save compared to younger generations.
How to Catch Up on Retirement Savings
If you’re feeling behind on your retirement savings, financial advisor Marguerita Cheng suggests looking at your contribution rates. While many people believe they are maxing out their retirement plans, they may only be contributing enough to receive their employer’s match, which is typically around 5% to 6%. Consider increasing your contributions to meet the annual maximum, which is $22,500 for this year. If you’re 50 or older, you can contribute an additional $7,500.
Even if you’re closer to retirement, it’s never too late to start saving or contribute more to your retirement accounts. Every dollar you save in your 20s or 30s can make a significant difference due to the power of compounding. Starting early and seeing your investments grow by around 10% per year can result in your money doubling multiple times over several decades.
So, don’t get discouraged if you feel behind on your retirement savings. Take advantage of online tools, set specific goals, and make a plan to catch up.
