More than one recent study has shown that only half of Americans are saving for their retirement and that is just dismal. Not even all of those savers are putting enough money aside to maintain the standard of living they desire. According to U.S. News & World Report’s Emily Brandon in the article “7 Obstacles to Saving for Retirement,” 42% of savers actually have enough put aside to live comfortably in retirement. Not only does she offer seven reasons why it is hard to save for retirement, she also gives some options to overcome the obstacles and set yourself up for a financially secure future.
It’s no secret that costs have been rising faster than salaries for most of Americans. As their costs and expenses increase, they are finding it really hard to put money aside in savings. If you are managing to save for retirement despite rising costs, look into the saver’s credit offered by the government. Those earning less than a certain amount are rewarded by the government for still managing to save in a 401k or IRA for retirement. Speaking of 401k’s, less than half of American’s work for a company offering a 401k and only 40% actually take advantage of the 401k plans offered. The key whether you have a work sponsored retirement plan or not is setting up automatic deductions. Take advantage of employer retirement savings plans and have money go in with each paycheck. If you don’t have a plan at work, sign up for an investment that automatically takes money out of your paychecks or savings account to put towards retirement.
While the economy has recovered from the recession, many lower income American households have not. Whether they were unemployed, received a pay cut, or had to find a new job making less money, 34% of Americans blame the recession on their lack of savings. Some people have stopped saving because of experiencing a traumatic event in their life. Injury or illness to them or a loved one has forced people to stop working and stop saving because their income is either less or gone altogether. As a double whammy, many Americans are dipping into their retirement savings to pay for these unexpected life events. Luckily, 2/3 of Americans have some money saved for an unforeseen circumstance.
Debt is causing many Americans to stop saving for retirement or not to start at all. It’s hard to decide whether to pay down your debt or save for retirement, especially when your debt is accruing interest. The best plan is to work with your finances and find a way to do both. Paying off debt by retirement is a good way to guarantee financial security, but you also need savings to live from and pay the bills you will have. Paying for rising higher education costs is hurting some Americans’ retirement savings. Many are taking money out of their existing plans to pay for their children’s tuition, while others have taken those savings from retirement and started paying for college. If you can’t afford to do both, it really needs to be up to your children to pay for their own tuition. Losing your retirement at the expense of college tuition is not a good plan.
It’s hard to mentally save for retirement when you are young and it seems so far away. But take advice from your elders and start saving for retirement with your first job out of school. It’s a decision that you’ll never regret, even if it means buying a smaller home or taking longer to pay off student loans. Once you have the retirement savings that you’ll need, you can use some of them to buy an annuity that will carry your living expenses throughout your lifetime. Saving for retirement can be difficult when there are so many other things on which to spend your money. But saving for retirement is like going to the gym for a workout; you’ll never regret it.
Written by Rachel Summit