Far Too Little for A Secure Retirement

Most, if not all workers know that they need to save to have a secure future for when they retire.

According to the 2021 annual report from the Social Security Board of Trustees, the benefit pool will be depleted by 2034. Without the safety net of Social Security, workers in the force need to make up the difference in their future income from the loss of SSI benefits in other ways. One of the biggest issues concerning workers saving for retirement is they’re simply not saving enough. According to a survey done by the Insured Retirement Institute an estimated 33% of workers are saving less than 5% of their income for retirement. This is far below what you’ll likely need to support yourself as a senior in retirement.

The adage was that saving 10% of your wages was sufficient to support a comfortable lifestyle at retirement, however, with rising healthcare costs, longer life spans, lower future investment returns; that 10% probably isn’t going to be as sufficient in covering your retirement costs as it used to be. While it is easy to say that workers need to save more it is much harder to do in practice, and honestly if many workers could save more, they most likely would. Here are some ways that might help assist in reaching your retirement goals:

1.??????Save your raises and bonuses. Any time you get some form of salary increase or “extra” money from your employer, you should divert those into a retirement account or into investment. Since you are not reliant on the extra money, you can continue living on your current budget and contribute your newfound cash into other retirement avenues.

2.??????Slowly but surely increase your retirement account contributions. If you can slowly inch up the contributions you put into your retirement investments, gradually you will phase in the necessary lifestyle changes without any real impact to your overall standard of living. One way you can do that is simply increasing your retirement contribution by 1% and see how that effects your standard of living. Once you get accustomed to the upped contribution level and can live without any difference in the past you can up it again. You can keep doing this slowly and continue to do it until you reach the contribution amount needed.

3.??????Make one BIG change. Sometimes the small budget cuts are hard to sustain and after a short period you resort back to your old lifestyle. One thing that can be done is to make a large lifestyle change. Things like changing your car; if it can get you from point A to B without any issues, why put more money than necessary into a depreciating asset? ?One other thing that you can change (this might sound outlandish for some, and it’s not for everyone) is downsize where you live or find someplace that you can live with roommates. Depending on where you live in the country, on average, about 30% of an individual’s gross income goes to paying the rent. If you can find someone that can support some of the burden for, find a place to live that has the necessities you need but at a lower cost, the extra money you save can be used for your future.

If these approaches don’t work for you, it is important that you find some solution that will work for you and will allow you to invest more. Everyone will need savings in their later years and the sooner you start planning and investing for the golden years, the easier it will be to build that nest egg.

The article is written by Christopher Yang.