Am I Saving Enough for Retirement? Here’s How You Can Save More Money on a Tight Budget
Many Americans are worried they’re not saving enough for retirement, a new survey by Allianz Life Insurance Company has found. Roughly half of people between the ages of 45 and 65 who are stashing away money for the future are worried that they’re not doing enough. This group – who Allianz dubbed “Chasers” –worry that they’ve fallen behind on building their nest egg and are afraid if they can’t step up their savings, a comfortable retirement will be completely out of reach.
Chasers have a median of $400,000 in retirement savings. Considering that nearly 50% of American families have nothing saved for their post-working years, according to data from the Economic Policy Institute, Chasers are actually in relatively good shape. But they don’t see it that way. (To check your retirement progress, use one of these retirement calculators.)
“Among those Americans actively saving for retirement, our study finds a dramatic difference between those who feel on track and those who feel behind, with this subset wishing for ways to catch up but without taking on too much risk,” Paul Kelash, vice president of Consumer Insights for Allianz Life, said in a statement. “While it’s a positive that they are actively saving for retirement, the level of anxiety is concerning and many are simply not aware of potential solutions to help them catch up.”
Whether you’re a Chaser who has a nest egg you wish was larger, or if you’re just getting started saving for retirement, there are things you can do to get on track for the future.
More than half of Chasers said that keeping up with other expenses was getting in the way of their retirement savings goals. Cutting those expenses can be difficult, especially if you’re dealing with a fixed cost, like a mortgage. But there are ways to lower them. Doing so can get you closer to saving 15% of your pretax retirement income, which is how much many experts recommend setting aside.
- Housing: Investopedia suggests looking in to refinancing your mortgage, which can lower your monthly payment and free up more money for retirement savings. However, with interest rates trending upward, refinancing may not make sense for many homeowners right now.
- Transportation: Transportation might be an area where there’s more wiggle room in your budget than you realize. Driving less and driving smart (i.e., cutting down on aggressive driving and avoiding idling) can save on fuel costs. You can also shop around for car insurance and look for discounts for bundling policies. And when the time comes for new wheels, opt for a cheaper vehicle over more expensive luxury cars.
- Cell phone: Ditching your big four carrier (AT&T, Sprint, T-Mobile, or Verizon) for a low-cost option through a company like Cricket or Boost could cut your monthly bill by 50%, according to CNBC.
Getting rid of unused gym memberships, needless insurance, and bloated cable packages are other ways to free up more money in your monthly budget to put toward retirement.
Save your raise
Annual pay raises are becoming less common, but if you’re lucky enough to get one, consider redirecting the extra money into your retirement savings. While saving an extra 1-2% a year might not seem like a lot, it can help. Plus squirreling away the extra cash helps prevent sneaky lifestyle inflation, which in turn means you’ll need less cash to maintain a similar standard of living in retirement.
Get your match
If you’re a Chaser, we’re guessing you’re already saving enough to get your employer match. But if you’re not, now’s the time to kick up your contributions so you’re getting as much free money as possible from your employer.
Start a Roth IRA
Only 53% of Chasers have an IRA, compared to 70% of confident retirement savers. Even if you’re saving in your company’s 401(k), contributing to an IRA can be a good idea. Depending on your situation, a Roth IRA can be especially appealing.
If you open a Roth IRA, you save money you’ve already paid taxes on. When you make withdrawals in retirement, they’re tax-free. If you expect your taxes to be higher in retirement than they are today, this is a smart money move. A Roth also has more flexibility than a 401(k) or traditional IRA, like the option to withdraw contributions without penalty.
Get comfortable with risk
Many Chasers also weren’t very comfortable with risk. Most prefer financial products that offer protection from loss, while only a third said investing in high-risk/high-reward products was the only way to save enough for retirement.
While taking on undue financial risk is not a good idea, especially as you get closer to your retirement date, taking some risk can help you get closer to your savings goals. A mix of 60% stocks and 40% bonds might be appropriate for someone in their 40s or 50s, financial advisor Jesse Abercrombie told CNBC. However, the perfect asset allocation for you depends on your risk tolerance. Talking to a financial advisor can help you figure out how to invest in a way that you’re comfortable with and that also puts you on a path to secure retirement.
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