The State of Retirement In America: How Do You Measure Up? - 401k Maneuver

The State of Retirement In America: How Do You Measure Up?

Saving for retirement may be a personal endeavor, and there’s no one-size-fits-all strategy, but it’s important to understand where you measure up. 

Take a moment to review the stats below, see where you measure up, and discover 6 ways to save today for a better retirement tomorrow. 

Americans Are Working Longer 

saving for retirement

Whether they want to or not, Americans are working longer. 

According to a recent Gallup study involving more than 1,000 employed individuals, the average age of retirement is 66 – an increase from age 60 in the 1990s.¹ 

What’s interesting is that 18 – 29-year-olds polled in the same study were optimistic they’d be able to retire closer to their early 60s. However, once participants turned 30, they were less optimistic about earlier retirement. 

Americans Are In Retirement Longer

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According to the World Bank, the average life expectancy in the U.S. climbed from 69.77 in 1960 to 79 in 2019.² 

But many Americans are living way beyond that. In fact, the Social Security Administration reports that people age 65 today have a 1 in 4 chance of living past 90.³ 

This means retirement can last 20+ years. 

This isn’t news to many Americans because in a 2020 study, TD Ameritrade reported that 81% of Americans are expecting to live longer and are working to reduce expenses and maximize their retirement plan contributions.⁴ 

Americans Don’t Have as Much Saved as They Should 

saving for retirement

A September 2020 Federal Reserve Survey of Consumer Finances report states that American households have an average retirement account balance of $255,200, up 5% from 2016.⁵

TD Ameritrade surveyed 2,000 Americans between 40 and 79, who had at least $25,000 in investable assets. Their Road to Retirement Survey, published in January 2020, found: 

  • Despite planning, nearly 2/3 of 40-year-olds have less than $100K saved for retirement.
  • Of those ages 50 – 59, 53% have less than $100,000 saved, while only 8% have a million or more. 
  • Of respondents ages 60 – 69, 38% have less than $100,000 saved, while only 12% have $1 million+ saved.⁶ 

In addition, the survey also found that 1 in 3 people over 50 are taking advantage of catch-up contributions.

Only 77% of Americans Have Retirement Plans

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TransAmerica Center reports 77% of American workers are saving for retirement through employer-sponsored retirement plans or other retirement vehicles, such as an IRA.⁷

More Americans Are Accessing Retirement Funds Early 

saving for retirement

Considering the data above, this is not good news because it often means having less money come retirement. 

TD Ameritrade’s Road to Retirement Survey found 44% of Americans ages 40 – 79 have taken money out of a retirement plan at some point. The study does not report what the money withdrawn was used for.⁸ 

6 Ways to Prepare Now for a Better Retirement 

saving for retirement

Take a moment to consider where you stand in your retirement savings journey. Specifically, ask yourself: 

  • Are you prepared for a 20 – 30+ year retirement?
  • Have you factored in rising healthcare costs and what you will likely pay come retirement?  
  • Are you saving the maximum in order to reach your retirement goals? 
  • Do you need to revise your retirement strategy?  

If you’re behind on your retirement goals, don’t fret. The good news is that you have total control over what you do today to plan for a better tomorrow.  

Here are a few ways you can optimize your retirement savings and take control of your financial future.

#1 Pay Yourself First

saving for retirement

When you get paid, before you do anything else (pay bills, buy groceries, or buy anything), pay yourself first. 

Meaning, you pay into your savings and investments first. 

If you have a 401(k), your savings are automatically taken out of each paycheck. If you have an Individual Retirement Account (IRA), you should be paying into this first as well.

Same goes for savings for your emergency fund. Pay into this before you pay any of your bills. Once you’ve paid yourself, then pay your bills. 

Whatever is left over is yours to spend however you want. 

If you don’t have much left to spend at the end of a pay period, just remember, you’re building a nest egg for the future. And, should an emergency arise, you’ll be able to pay for it in cash and not have to borrow. 

Saving for retirement is a long game. The sooner you start, the better your chances are of ending ahead, or at least on track. 

[Related Read: Should I Pay Off Debt or Contribute More to My 401(k)?]

#2 Pay Off Debt

saving for retirement

It can be difficult to save for retirement and pay off debt. We get it. 

But if you don’t work now to pay off credit cards, personal loans, outstanding medical bills, or any other debt that’s incurring interest, you run the risk of bringing that debt with you into retirement

The key to eliminating your debts starting today is to come up with a plan that will allow you to pay it off while saving for retirement, and being able to cover all your monthly expenses. 

This probably means you will have to rethink your spending habits and cut back. Before buying something new, ask yourself if is this something you need or want? If it’s a want, don’t buy it. 

It will take discipline and focus. But with a plan and a little determination, you can do it! 

[Related Read: Should I Pay Off Debt or Contribute More to My 401(k)?]

#3 Maximize Retirement Plan Contribution Limits 

saving for retirement

Employee 401(k) contribution limits for 2021 are $19,500. For those age 50 and older, the 401(k) catch-up contribution is $6,500. 

IRA (individual retirement account) contribution limits for 2021 are $6,000. This applies to pretax or Roth IRAs. The catch-up contribution for people age 50 is $1,000.  

If you can’t max out the annual contribution limits for a given year, at least put in enough to get the full company match. Company matching is one of the secrets to maximizing your 401(k) or workplace retirement account, and it’s often the most overlooked. 

[Related Read: 4 Ways to Potentially Maximize Your 401(k) Company Match]

#4 If You’re over 50, Take Advantage of Catch-up Contributions

saving for retirement

If you are over 50 and are not taking advantage of catch-up contributions, you are missing out on an opportunity to maximize your retirement savings.  

For those age 50 and older, the 401(k) catch-up contribution is $6,500. This means, if you’re 50 or older, you are able to contribute $26,000. If you turn 50 anytime during December of 2021, you’re still eligible to contribute the additional $6,500.

For IRAs, the catch-up contribution is $1,000. That means you can save a total of $7,000 this year. 

[Related Read: Retirement Plan Contribution Limits for 2021]

#5 Build Your Emergency Fund 

saving for retirement

Having an emergency fund helps cover unexpected expenses without stressing or having to borrow or carry a balance on your credit card. 

It may also prevent you from taking early withdrawals from your retirement account. 

Building an emergency fund may mean you can’t save as much for retirement in the short term. However, it will significantly help in the long run and ensure you stay on track with your retirement savings goals. 

#6 Seek Expert Help 

saving for retirement

If you’re struggling to meet your retirement saving goals or if you need help crafting a plan to get you to where you want to be in retirement, then seeking expert advice may help increase chances of a comfortable retirement. 

The truth is: Saving for retirement requires strategy and skill. 

This is your future we’re talking about, and you need to take it seriously. 

Instead of going at it alone, hoping you have enough retirement income, find an expert to help you navigate the journey. 

Check out our 401(k) calculator to see how much extra income you could have in retirement using professional help. 

Sources:

  1. https://finance.yahoo.com/news/jaw-dropping-stats-state-retirement-220025630.html?guccounter=1
  2. https://data.worldbank.org/indicator/SP.DYN.LE00.IN 
  3. https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf  
  4. https://www.forbes.com/sites/katestalter/2020/11/29/do-you-know-if-youre-prepared-for-retirement/?sh=1abdbdd81e1e 
  5. https://www.federalreserve.gov/publications/files/scf20.pdf
  6. https://s2.q4cdn.com/437609071/files/doc_news/research/2020/road-to-retirement-survey.pdf 
  7. https://finance.yahoo.com/news/jaw-dropping-stats-state-retirement-220025630.html?guccounter=1 
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