Americans are coming up way short when it comes to building a sufficient nest egg for their golden years. According to Fidelity’s recently released 2023 Retirement Savings Assessment, Americans saving about 78% of what they’ll need in retirement (a 22% shortfall). In this survey of more than 3,500 participants, the assessment also reveals 52% of Americans are likely not able to cover at least their essential expenses in retirement.
Regardless of your current confidence level, working with a financial advisor could help you create a retirement plan for your needs and goals.
What’s Causing the Decline in Preparedness
Americans are not saving as much money as they should. Baby boomers, Generation X-ers and millennials are all socking away less than Fidelity’s recommended savings rate of 15% for retirement:
- Baby Boomers: 9.5%
- Generation X: 11.1%
- Millennials: 9.5%
Digging deeper, Americans, according to the assessment, believe inflation is a big cause for their lack of savings. Some 82% of respondents believe inflation is going to eat into their savings as they prepare for retirement. And many have questions about how long inflation is here to stay. All told, 57% believe inflation is going to stay around for the next three years, while 35% think it’s going to be a more long-term problem.
How Americans Can Get Back On Track
Adjust Your 401(k) Match Contributions
If you have access to your 401(k) plan, you may want to consider making adjustments to your contributions. For example, if your employer offers a 6% match and you are only contributing 3%, it may be in your best interest to change that and match the 6%. Take advantage of the matching contributions your employer provides to you.
Take Advantage of SECURE 2.0 Act Catch-Up Contributions
In a 401(k) plan for 2023, the most you can make in contributions is $22,500. But if you are 50 or older, you can contribute an extra $7,500 on top of the $22,500.
However, down the road in two years, there are so some who will want to take advantage of SECURE 2.0 Act’s new rule immediately. Starting in 2025, those who are ages 60 to 63 with a 401(k) or 403(b) plan will be entitled to contribute 50% more than their standard contributions.
Adjust Your Lifestyle
If you find yourself spending more money on items you don’t need, consider cutting back. That could be going out less for dinner at restaurants and deciding to cook your own food at home. Even though grocery shopping has been impacted by inflation too, cooking at home will likely still save time and money over the long term. Considering creating a budget.
Bottom Line
A lot of Americans are feeling the pressure to save for retirement. And there are many who don’t have the luxury to due to their immediate needs personally and/or for their family. But when the opportunity knocks, take advantage of it. If you have an employer who offers a 401(k) or 403(b) plan, make sure you match their contributions if your employer offers any. If you don’t have an employer-sponsored retirement plan, you can also make changes by adjusting your lifestyle.
Tips for Creating Your Retirement Plan
- A financial advisor can help you take care of your finances when you’re retired. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Are you self-employed? You won’t have access to a 401(k) but don’t let that be an excuse to put off retirement savings. You can still save by opening a SEP-IRA. A SEP-IRA is relatively easy to set up and has flexible rules on annual contributions.
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