Unfortunately, only a very small minority of workers are really saving enough for retirement. In fact, many aren’t saving at all. Let’s look at a couple quick statistics from a study done this summer by the U.S. Government Accountability Office (GAO) to see just how much folks are actually putting away. Here are a few facts.
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1. Around half of households age 55 and older have nothing at all saved for retirement.
2. Only 35 percent of household age 55 and older own a home with no debt.
3. Among these households, age 55 and older, that don’t have retirement savings, about 29 percent have no pension plans, 401(k), or savings accounts. In other words, they have no source of income at all that they can fall back on when they retire.
It’s also important to note that women are particularly vulnerable to finding themselves unprepared for retirement. Another study done this summer found that women over 65 are twice as likely to live in poverty as men.
But, lack of retirement saving isn’t just for older folks. Far from it. Generation X is shockingly unprepared for retirement. Millennials are doing better than other generations, but they also aren’t acquiring the assets and financial independence that other generations did during their current stage of life.
It may be time for a wake-up call, especially for Americans edging closer to retirement.
Recently, data released by Fidelity shed some light on a simple way we can all significantly improve our retirement income. This year, can you start to save just 1 percent more for your retirement? It could make a huge difference in your financial future. Here are a few points to consider.
1. It won’t cost much now…
Monthly, saving just 1 percent more for retirement isn’t very costly at all. The average 25-year-old (with an annual income of about $40,000) will put away $33. 35-year-olds who make about $60,000 a year would put away about $50 a month, and folks who are 45 and make about $70,000 would put away about $58 a month.
2. …but the benefits are significant.
It’s important to remember how these small changes really add up (and pay off) in retirement. If the age groups mentioned above put away the additional income that’s recommended, they’d see real savings down the road. The 25-year-old would have $3,870 additional annual retirement income, the 35-year-old would have an additional $3,210, and even the 45-year-old would later see an additional $1,880 in annual retirement income.
3. They didn’t assume anything crazy here.
The rates and figures took a few other factors into account. The retirement age was assumed to be 67 years old (the current average retirement age is 62, but it should go up in the years to come), withdrawals on accounts were made equally until age 93 (an optimistic figure), and an annual raise of just 1.5 percent was also factored in to the data.
So, in 2016, consider doing something wonderful for your future self. Put away just a little tiny bit more each month toward your retirement. You’ll be glad that you did down the road.
Be sure to check out the full report for more information.
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