Most Americans anticipate retiring, but “three-fourths (76%) of Americans are concerned about economic conditions affecting their ability to achieve a secure retirement,” according to the National Institute on Retirement Security. Eighty-eight percent of those surveyed believe America is about to face a retirement crisis. With this worry crossing political party lines, it may come as no surprise that this year’s roundup of retirement investing research publications offer some good news and some bad news. Even though the average American will spend 20 years in retirement, as reported by the U.S. Department of Labor, not everyone will invest enough to be able to fully fund their retirement.
First, let’s hear the good news. “Between 2013 and 2016, the proportion of all families that saved increased from 53.0 percent to 55.4 percent,” reported by the Federal Reserve Bulletin - September 2017. Although this is a small gain, the trend is heading in the right direction — up.
Another interesting note from the Federal Reserve Bulletin (Table B): Mean retirement savings, “Among families that have [IRA and defined-contribution (DC pension)] assets, the average combined IRA and DC pension account balance increased [from $200,800] in 2013 to $237,600 in 2016…” This seems like a sizable increase, but shows the most upside for those in the top income distribution. Households in the 90-100 percentile of usual income increased retirement savings from $460,000 in 2013 to $641,400 in 2016.
Given this data, it seems Americans have saved more overall between 2013 and 2016, especially those in the upper income brackets.
Now let’s look at the negative side of the data. The Federal Reserve Report on the Economic Well-Being of U.S. Households in 2016 (p. 57), reports that 28% of non-retired adults say they have no retirement savings at all — none. That same report indicates that, whether a family has retirement savings at all, again depends heavily on income level. Of the survey respondents making less than $40,000 per year, only 44% have retirement investments. On the other hand, 96% of people making at least $100,000 annually said they have some retirement savings.
What do all these statistics mean?
People of all age groups, income levels, ethnicities, and education levels may want to beef up their retirement investing using employer-sponsored 401(k) plans, IRAs, Roth IRAs, Keogh plans, and any other savings strategies that make sense. If Americans start now, they may be able to reverse these downward trends.
To get started with retirement investing, you may want to read through the U.S. Department of Labor website which offers videos, tools, articles, and other resources for workers preparing for retirement. We’ve also summarized the Transamerica Center for Retirement Studies 18th Annual Transamerica Retirement Survey of Workers for you to reference here. Start by following these basic steps to get a foundation of a retirement plan.
1. Create a budget.
2. Invest for retirement. Even starting to save a small amount puts you in a better place than not saving at all.
3. When considering employment, consider retirement benefits.
4. Take advantage of employer matching contributions.
5. Calculate retirement savings needs using the Aegon Retireometer.
- Factor living expenses, healthcare, and Social Security benefits.
- Develop a retirement strategy.
- Document your plan.
6. Get educated about retirement investing by professionals and your own research.
- The U.S. Department of Labor offers retirement investing insight.
- Transamerica.com has information about investing for retirement.
8. Be proactive to help ensure continued employment even in retirement. Keep your job skills up to date, stay current on employment trends, and maybe even diversify your skills with training. There are wealth and health benefits to working longer.
9. Have a backup plan in case of job loss or early retirement due to unforeseen circumstance. Look into freelancing and earning income from sharing economy opportunities.
10. Take care of your health. The healthier you remain, the better quality retirement you’ll have and the less money you’ll spend on medical costs in retirement.
A financial professional can also help with retirement strategies. Before sitting down for an appointment, do some research using the links in this article.
Things to Consider:
- Sit down with these ten tips to write a killer retirement plan.
- Take advantage of employer sponsored retirement investing options.
- Maintain your health for a better quality retirement.
Neither Transamerica nor its agents or representatives may provide tax, investment or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.