Saving for retirement is often one of the biggest financial goals for Americans, but many people struggle to put away money for their golden years. In fact, more than 20% of U.S. adults said not saving for retirement early enough was their biggest financial regret, according to a recent Bankrate survey.
There can be many challenges to saving for retirement. Short-term needs often take precedent over saving toward retirement, which can feel like a far-off dream for many. But starting to save for retirement as early as possible will set you up for success later on.
Here’s what else you should know about saving for retirement including some tips on how to get started.
Davings data and statistics
• 22% of Americans haven’t contributed to their retirement savings in the past year, according to a recent Bankrate survey.
• 29% of Gen Z said they aren’t saving for retirement, the same Bankrate survey found.
• The average retirement balance in Vanguard plans was $112,572 at the end of 2022, but the median balance was just $27,376, according to a Vanguard report.
• 41% of U.S. adults said insufficient retirement funds were keeping them from feeling financially secure, according to a Bankrate survey.
• 39% of Americans said being unprepared for retirement had a negative impact on their mental health, according to a Bankrate survey.
• 21% of Americans said not saving early enough for retirement was their biggest financial regret, according to a Bankrate survey.
Common reasons Americans delay saving for retirement
“Amid the tumultuous developments of the past several years, including a short but severe recession and a period of high and sustained inflation, a majority of Americans say they’re not where they need to be to achieve their retirement savings goals,” says Mark Hamrick, Bankrate senior economic analyst. “Compared to our survey about a year ago, there’s been no progress on this front. Those closer to retirement age are among those feeling this sense of urgency the most.”
It’s often challenging to set aside money for a long-term goal such as retirement, when you may have plenty of good uses for the money in the here and now. But it’s important to build retirement savings into your budget and financial plan, rather than only saving if you happen to have extra money available. Contributing to a retirement plan is a great place to start.
Reasons Americans delay saving for retirement include:
• Inflation causes expenses to rise
• Student debt
• Poor spending habits
• Lack of income
• They don’t know where to start
Keep in mind: The earlier you start saving for retirement, the more time you have to grow your nest egg.
Who is not saving for retirement?
We see different approaches to saving for retirement depending on factors such as gender, age, race, education level and household income. For instance, a recent Bankrate survey found women tend to contribute less to retirement savings than men, with 26% of women saying they haven’t contributed to their retirement savings in the past two years, compared to 19% of men. This could be due to differences in income between men and women.
Tips for saving for retirement
–Start early – Getting started as soon as you can is one of the best things you can do for your retirement savings. Even if you’re starting with small amounts, money saved today can compound for decades, which makes a big difference when it comes to long-term savings.
–Get your 401(k) match – At a minimum, everyone should save enough money to receive the full employer match on their retirement savings. Experts say this is like free money and offers a guaranteed return on your investment. Some employers match 100% of employee contributions up to a certain percentage, which is like instantly doubling your money.
–Contribute to an IRA – Once you’ve ensured you’re getting your full employer match, you can also contribute to an IRA. A traditional IRA could come with an immediate tax break and you won’t pay taxes until you start taking withdrawals during retirement. You can also make contributions to a Roth IRA with after-tax dollars, but you won’t pay taxes on your withdrawals.
–Invest in stocks for the long-term – When retirement is still a long way off, investing in stocks is typically going to give you the highest returns. Stocks can be volatile in the short-term, but over time they’ve returned about 10% annually. Use Bankrate’s retirement calculator to see how much you’ll need to retire.
–How much money do I need to retire?
How much money you’ll need to retire will depend on the unique circumstances of each individual. How much you’ll need is a function of how much you want to spend. The higher your annual expenses are, the more money you’ll need to set aside for retirement. Some experts suggest saving 25 times your annual expenses as a rough estimate of the amount you’ll need.
–What is the average age for Americans to retire?
The average retirement age in 2023 for Americans is 62 years old, according to Gallup. This is up from age 57 in 1991.
–When should I start saving for retirement?
You should start saving for retirement as soon as possible. Those who start saving in their 20s have a major advantage over those who don’t get started until their 40s or 50s. Money saved today has more time to compound and grow, making it more likely that you’ll achieve your retirement goals.