Do you think you’re Saving Enough for Retirement?
48% of workers age 55 or older and nearing the age of retirement have saved less than $100,000 for retirement, in line with the Employee Benefit Research Institute. For a third of workers, they’ve saved lower than $25,000.
Don’t bank on Social Security. It only replaces 39% of pre-retirement income for the average worker retiring at 65, according to the Center for Retirement Research at Boston College.
For those without enough, The New York Times recently published an article regarding how you can play catch-up with your savings.
For one, the message Michael Kitces, director of wealth management for Pinnacle Advisory Group, wants to send: It’s never too late to start saving. Case in point, an individual who saves 30 % of a $100,000 salary at the age of 51 could potential save up to more than $1 million by age 65.
Kitces, publisher of the financial advice blog Nerd’s Eye View, suggests developing a household budget of all the expenditures while you’re still paying for your children’s needs. Then, once the children are out of the home, reallocate that spending on retirement savings.
Maximize savings contributions in a workplace 401(k) account, if you have one, or an IRA. For those over the age of 50, limits on tax deferred savings for 401(k) accounts is $24,000 and $6,500 for IRA’s.
Also, financial experts say one of the best pieces of retirement savings advice: Keep working longer. They urge households to wait to file for Social Security. Benefits may be claimed as early as age 62 but the longer you wait, the more you’ll gain. The monthly benefits rise 8% for every year that you wait.
“There’s nothing you can put your money into today that will create a better rate of return,” says David Blanchett, head of retirement research at Morningstar. However, nearly half of workers file at the age of 62.
Also, don’t underestimate the advantage to downsizing. Relocating to a smaller home or relocating to a less expensive home within a metro area for those approaching retirement can be quite a smart move, financial experts say. They can take out the equity from the home sale and then invest it to produce income, Kitces says.
