The vision of a financially-secure retirement is an essential aspect of the American dream, although many wonder if they're heading the right way. As per a recent survey, the median retirement savings for U.S. households hover at $64,000, while the perceived requisite is a whopping $1.46 million for a comfortable retirement.
However, such concerns should not lead to despair. Prioritizing certain steps and strategies can aid your retirement fund in catching up.
Many US individuals adopt diverse mechanisms to save for retirement, both within and beyond tax-privileged retirement accounts like employer-backed 401(k) plans. These may also include individual retirement accounts, Keogh accounts, and numerous employer-assisted accounts.
In many cases, household retirement savings are not limited to these accounts alone. High-income families might also invest in stocks, bonds, and diverse investment options earmarked for retirement. Homeowners often view the accrued home equity as a prospective retirement fund source, accessible through selling the property, a home equity loan, home equity credit line, or reverse mortgage. Small business owners might treat their businesses as assets convertible to retirement finances.
Sadly, many Americans lack retirement savings. Around 54.3% of American families held a defined-contribution retirement plan or an individual retirement account (IRA) as of 2022, but future changes in the SECURE 2.0 Act rules may encourage more people to enroll automatically.
Retirement savings can differ significantly across generations and the benchmark considered. Factors influencing people's ability to save for retirement include income, age, and educational attainment. Unsurprisingly, people with lower income scales and lesser education often struggle to save for retirement.
A survey by the Transamerica Center for Retirement Studies (2024) found that 52% of employees concurred that insufficient income restricted their ability to save for retirement, a sentiment shared broadly across generations.
Other factors, like retirement plans and envisioned lifestyle, can significantly impact eventual retirement fund needs. It's advisable to estimate future retirement expenses to understand the necessary retirement fund. Most people find cost-cutting strategies helpful.
In most cases, increasing retirement savings requires reducing current expenditures and investing more for the future. Other less burdensome strategies include setting aside portions of future salary hikes or bonuses for retirement savings. It is important to make the most of employer matches and invest wisely, adhering to one's age-specific investment strategy.
Ultimately, diligent saving and consistent investing for prolonged periods are the two pillars of a secure retirement fund.