There is a retirement crisis currently underway. Why is this? Because people don’t save during their working years to fund their golden years. The Economic Policy Institute recently released is a startling report about American’s retirement savings.
The graph above shows the median account values of retirement savings for a given age group. The overall median among all age groups is a meager $5,000 while the median value for those closest to retirement, 56-61 age group, have only $17,000 saved up.
To put this in perspective, I am 26 years old and have been employed full time for less than 4 years. In my retirement accounts, which include a company 401k, a rollover IRA and a Roth IRA, I have $47,589 saved.
Retirees are relying on Social Security by larger percentages these days. Nearly 2 out of every 3 retirees rely on Social Security for at least 90% of their retirement income. No matter your current age, there are ways to ensure that you are setting yourself up for success in your later years. Here are the steps I followed to have my current retirement savings:
- Fund a Company 401k and get a full employer match. This should be a no brainer. Fund your company’s 401k plan at least to the amount that will maximize your employer’s match. It’s FREE MONEY.
- Start an IRA. I prefer a Roth IRA because it is money you will never be taxed on again, and is a good complement to a 401k (which you will pay income tax on in the future). Go to Vanguard’s website and get one started in a matter of minutes.
- Maximize out your 401k. If you are under 50, you can contribute up to $18,000 of your pre-tax pay to a 401k. If you are over 50, you can contribute an additional $6,000. See if you can contribute an additional 1 or 2 percent each year until you reach the maximum.
Planning for retirement is now more important than ever. Many don’t have pensions to rely on anymore, so the responsibility is now on YOU to determine your retirement destiny.
Budget Smart, Invest Wise