Plan to Retire? You Likely Haven’t Saved Nearly Enough, This Report Says
Listen up, America. We need to have a chat about retirement.
I know you’re busy. I know you’re stressed. I know you’re tired. But we can’t put this off any longer.
Take a look at your retirement fund. Are you 50? If so, do you have the recommended amount of six times your salary in there?
If you’re not -- will you by the time you hit that age?
A new report from the Economic Policy Institute (EPI) revealed that the average family has nowhere near enough money in their retirement funds.
How does yours compare?
Americans Don’t Have Enough Saved for Retirement
According to the report by the EPI, the average family with adults between the ages of 44 and 49 has retirement savings that rings in at $81,347.
However, since so many families have no savings whatsoever, and some have hefty retirement funds, using the average to measure retirement health would be flawed.
So what’s a more truthful number? The report states the median savings, or those at the 50th percentile, for those families is only $6,200.
Most families still haven’t recovered what they’ve lost from the Great Recession and still haven’t contributed additional savings to make up for it, according to the report.
If you aren’t alarmed, you should be.
How You Can Boost Your Retirement Fund
You may be thinking, “Well how exactly do you recommend we save for retirement when we’re just barely getting by, Miss Smarty Pants?”
Well, it won’t be easy. But it’s possible -- if you start now.
You can sign up for clinical trials, rent out your home on Airbnb and get seasonal jobs to help you start funneling money into a retirement fund.
Our post “12 Strategic Steps to Save an Extra $5,000 for Retirement in 12 Months” is a great place to start brainstorming ideas to generate money for your retirement fund.
In addition to side gigs, you can also venture into investing your money. Read our post “If You Invest $100 Today, How Can You Get the Best Return?” for a few tips on what may be the best option for you.
Still not sure how your retirement savings add up? Check out this calculator -- it’ll tell you how much you’ll need to start saving monthly to stay on track toward a healthy retirement fund.
Here’s What You Should Do With Your Retirement Savings
Once you’ve got extra cash for your retirement fund, consider doing something with it that’ll make it go the extra mile, such as putting it in an IRA or 401(k), if available.
A 401(k) is a company-sponsored retirement fund that, thanks to compound interest, grows your money.
Companies usually promise to match a certain percentage of whatever you contribute into the account -- meaning that you’re not only getting free money, but it’s growing while you go about living your life.
Sweetening the deal, 401(k)s provide you with a tax break by lowering your taxable income, since your contributions are taken out of your paycheck before it’s taxed.
If your place of employment doesn’t offer a 401(k), you still have a way to gather interest on your retirement funds: an Individual Retirement Arrangement (IRA).
IRAs are also open to people who aren’t working, such as students or stay-at-home parents.
No matter which option you choose, be sure to refrain from withdrawing money before you reach the age of 59 ½. If you do, you’ll face a 10% early withdrawal penalty.
Your Turn: How does your retirement fund compare to the median amount for American families?
Kelly Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.