Americans are behind retirement savings. Here’s how to get started

Most Americans are not ready for retirement.

While most non-retired adults have some kind of nest egg, only 36% believe their retirement savings are on track, according to the Federal Reserve.

A separate survey by the Insured Retirement Institute found that most workers do not have enough retirement savings and do not leave enough aside to catch up.

It is a problem that existed before the Covid-induced recession. For some, the pandemic exacerbated the problem. One-third of Americans Whoever planned to retire said it will now happen later because of Covid and that around this March, approximately 14 million stopped contributing to their retirement accounts each month, according to an Age Wave study. and Edward Jones.

However, others had the opportunity to set aside more money thanks to the forced decrease in spending.

In fact, low-wage workers, many of whom do not even have access to retirement savings plans, have been the hardest hit by the layoffs, said Anqi Chen, deputy director of savings research at the Boston College Center for Retirement Research. They are also lagging behind in recovery.

“About half of workers at any given time in the last 40 years or so do not participate in a retirement account,” he said.

Still, saving for retirement is one of the most important things you can do. Here’s how to get started.

If you are young, the best thing you can do is start saving for early retirement, as your savings will have the advantage of compound interest.

Also, be consistent with your contributions.

If you open a Roth individual retirement account at age 18, for example, contribute $ 100 a month for the next 40 years and assume an average annual return rate of 12%, you’ll end up with $ 1 million, according to a personal finance expert . Suze Orman. If you wait ten years to get started, the end result would be $ 300,000 at 58 years old.

If you didn’t start saving at a young age or had to stop leaving money aside during a time of financial stress, don’t be discouraged, said certified financial planner Abbey Henderson, CEO of Concord, based at Abaris Financial Group, based in Massachusetts.

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“My fear is that people will feel like,‘ I’m behind. I’ll never invent it, so I won’t try, ”Henderson said.

“It all helps,” he said. “Take Baby Steps.”

So even if it’s only $ 25 a week, do it. Once you feel comfortable and able to climb, do so.

You have the right combination of assets in your portfolio based on your risk tolerance. Shares, for example, are riskier than bonds, but give a higher return. You may take more risks when you are younger, as your portfolio has time to recoup losses.

It’s important to choose an asset allocation that allows you to sleep at night so you don’t panic when you come to the market, Henderson said.

Steve Parrish, co-director of the New York Life Center for Retirement Income, also suggests considering annuities as part of your overall retirement strategy, as many companies no longer offer pensions. Annuities offer a guaranteed income in retirement.

U.S. workers believe it takes an average of $ 500,000 to feel financially secure in retirement, according to a recent survey by the Transamerica Center for Retirement Studies.

However, the final number really depends on your specific situation, such as your income and your living expenses.

Instead, consider saving 15% or 20% of your income on a variety of vehicles, such as a 401 (k) plan, a savings account, and a 529 college savings plan. 20% can also include any business matches you get in your 401 (k).

“There are a lot of things that can change from here to retirement,” Henderson said. “You can go crazy trying to target a certain number in your 20s and 30s.”

Instead of retiring flat, consider reducing part-time work hours.

“People are starting to say that maybe it’s a process of slowing down and eventually total retirement,” said Parrish, who noted that people now live longer.

This will also allow you to delay Social Security for as long as possible, so that when you charge, the benefit will be higher.

Be sure to pay attention to your employer’s benefits. If you remove too much, you may lose your health insurance. Medicare does not reach the age of 65.

Don’t fall into the trap of not including inflation in your retirement plans, Henderson said.

Have enough diversification in your portfolio, including maybe some real estate, inflation-adjusted treasures or commodities, and keep up with your program, he advised.

Also remember that Social Security is your best protection against inflation, Parrish noted. A recent estimate places the cost-of-living adjustment for 2022 at 6.1%.

Of course, depending on your age, there is concern about the program itself. The latest projections show that the fund will only be able to pay the full benefits provided until 2033.