Only 28 percent of Americans meet their monthly retirement savings goals, according to Bankrate.com. Faced with the demands of everyday life, along with setbacks like unemployment, the remaining 72 percent fail to save enough each month to live out their retirement dreams. Understanding why people don't save and learning how much you'll really need to live comfortably can help you boost your savings rate and meet your financial goals.
For decades, companies provided pensions for retired American workers. This left retirees with a set amount of money each month, with no need to take on the burden of saving for retirement. Over time, companies have shifted away from traditional pensions, placing the burden for saving on the employees themselves. For example, 35 percent of workers in private industry were covered by a pension in the early 1990s, according to the Bureau of Labor Statistics. By 2011, that figure dropped to 18 percent. Americans are also marrying and having children later in life. Rather than saving for retirement in their 40s and 50s, people are burdened with mortgages, debt and college expenses for children. On top of that, CNN reports nearly 50 percent of Americans simply feel they can't afford to save for retirement because they're having trouble making ends meet thanks to inflation, high unemployment, increased debt and stagnant incomes.
How Much You Need
Your exact retirement savings requirements will vary based on your lifestyle, your pre-retirement income and where you choose to live. As a general rule of thumb, you'll need about 60 percent of your pre-retirement income for each year of retirement, according to a 2012 "Forbes" article. By age 35, you should have saved an amount equal to one year of your annual salary. By age 45, you should have three times your salary saved, and by age 55, you should have socked away five times your salary. By the time you retire at age 67, you should have an amount equal to eight times your annual income in the bank, according to CNBC.
Retirement savings for the average baby boomer fall about half a million dollars short of the amount needed for a comfortable retirement, according to a 2013 report by "USA Today." "Forbes" reveals that just 17 percent of people surveyed have more than $250,000 saved for retirement, while a full 60 percent have less than $50,000. As of 2012, nearly half of Americans report not having any retirement savings, according to CNN.
To boost your retirement nest egg, start saving as early as possible to take advantage of compound interest. The U.S. News & World Report website states about a third of employers offer 401(k) matching contributions of up to 3 percent of workers' pay. Take advantages of this free money by contributing enough to receive the company match. Consider opening a traditional individual retirement account or Roth IRA to take advantage of tax-deferred or tax-free savings.
- Forbes: Six Reasons You'll Never Retire
- Bankrate.com: Two-thirds of Americans Don't Save Enough
- USA Today: Retirement Living -- Debt Holds Many Boomers Back
- CNBC: Think Magic Numbers (Plural!) for Retirement Savings
- CNN: 49 Percent of Americans Saving Zilch for Retirement
- Bureau of Labor Statistics: The Last Private Industry Pension Plans -- A Visual Essay
Emily Beach works in the commercial construction industry in Maryland. She received her LEED accreditation from the U.S. Green Building Council in 2008 and is in the process of working towards an Architectural Hardware Consultant certification from the Door and Hardware Institute. She received a bachelor's degree in economics and management from Goucher College in Towson, Maryland.