Are you saving enough for retirement? Odds are, probably not.

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Are you saving enough now for your eventual pension? Chances are you probably are not.

The latest Federal Reserve Survey of Consumer Finances for 2019 showed that the median amount of savings in U.S. retirement accounts was $ 65,000. To put it mildly, that nest egg will not give you a very comfortable pension.

However, the number applies to Americans of all ages. When broken down by age group, Americans between the ages of 55 and 64 had a median savings of $ 134,000 – still far from ensuring a long, happy retirement – but significantly better. Americans under the age of 35, who still have a lot of time to increase their savings habits, had an average savings of $ 13,000. These days, it would buy you a decent used car.

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“About half of Americans risk not being able to maintain their standard of living before retirement after quitting work,” says Angie Chen, a research economist at the Center for Retirement Research at Boston College.

There are a large number of factors that affect the planning of retirement – many of them, such as life expectancy, market returns and long-term inflation rates, are very uncertain. There are several rules of thumb that offer measures of the amount of assets you need to accumulate in order to retire comfortably.

The so-called Rule of 25 suggests that you save 25 times your expected annual expenses in retirement. It will allow you to withdraw 4% of these savings annually over a 30-year time horizon.

“People should not target a number as much as a savings rate,” Chen said. “The best thing people can do is save early and save consistently.”

Starting with the results of the Federal Reserve survey, Chen’s organization is crushing a lot of numbers to determine the target income replacement rates that households need in retirement and the savings rates they need to achieve those goals.

Households with lower incomes demand higher income compensation rates (80%) and households with higher incomes lower (67%). Because social security provides a proportionately greater benefit to lower-income households, they will require smaller percentages of their retirement income from personal savings.

The savings rate required to achieve the goals of a person starting to save up at age 25 and retiring at age 62 was 11% for the lowest tercil of households by income, 15% for middle income and 16 % for high income. If you only start saving later, the rates should be higher.

A middle-wage earner aiming to replace 70% of early retirement income must save 24% of income if they start at age 35, and impossible 44% if they start at age 45. The required savings rates fall dramatically if retirement is postponed. A 35-year-old can save 15% by retiring at age 65, or 12% at age 67.

Setting big goals that you can not achieve is worse than taking smaller steps that fit where you are in life.

Jude Boudreaux

senior financial planner at the Planning Center

Take these numbers with a large spruce of salt. Targeting numbers or even savings rates can be counterproductive, said certified financial planner Jude Boudreaux.

“When it comes to behavior change, well-meaning guidelines are often not very good in application,” said Boudreaux, who merged his New Orleans-based consulting practice Upperline Financial Planning with The Planning Center in 2017 and now works as a senior financial planner. there. “There are general rules, and then there is everyone’s personal situation.

“My wife and I did not reach the retirement savings goals because we were building my counseling practice.”

The problem with setting goals is the behavioral costs of losing them. If someone can not reach a goal, they often end up not doing anything at all.

“Setting big goals that you can’t achieve is worse than taking smaller steps that fit where you are in life,” Boudreaux said. “My advice to customers about saving up for retirement is to ask themselves ‘Can you do more?’

“If you save 5% of your income, you can save 6% and thus continue to increase your ability to save.”

Boudreaux suggests that people learn to track their spending and savings in their 30s to understand how their choices will affect their future financial position. Like all other financial advisors, he suggests that if you participate in an employer-sponsored retirement plan with a contribution matching program, take full advantage of it. Nothing will cushion a nest egg better than free money.

If you feel far behind with your savings later in life, do not start swinging behind the fence with your investment portfolio. It is a much better strategy to defer your retirement and / or reduce your spending further. It will stretch your savings and be able to allow you to expose social security claims to a greater benefit later – further reducing the need for personal savings.

“Take no more risks to catch up on the lost time,” he said. “You could end up in a much worse situation.”

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