Retirement: Are You Saving Enough

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By: gina.williams
on 23rd Feb,2012

A study by 401k.S. News). The Trust Funds would require another $3.
Retirement: Are You Saving Enough

Retirement is something we all look forward to after working 45+ years.  We contribute to our 401k and take other steps, but is that really enough?  “According to the nonprofit Employee Benefit Research Institute, about 1 in 4 workers describe themselves as ‘not at all confident' about retirement. A study by shows that on average, Americans with 401(k)s contribute between 5.5 and 7 percent of their pre-tax salaries into those accounts—far less than most people need to replace the recommended 80 percent of their working salaries during retirement” (U.S. News).  So, effectively if you want to live as you are now into retirement, you need to plan on saving enough before retirement to account for 80 percent of your working salary.  But how do you do that?

Some say that you can depend, in part, on what you've put into social security over the years; as a matter of fact, some even say that you can rely on social security to supplement nearly 50 percent of the money you'll need in retirement.  However, due to the massive population of the baby boomer generation, this is unlikely.  This generation will reach the age to receive social security benefits between 2011 and 2029; meanwhile, according to the Social Security Administration in 2003, “The projected point at which tax revenues will fall below [Social Security] program costs comes in 2018…. The projected point at which the [Social Security] trust funds will be exhausted comes in 2042 -- one year later than the estimate in last year's report…. The Trust Funds would require another $3.5 trillion in today's dollars, earning interest at Treasury rates, to pay all scheduled benefits over the next 75 years. This obligation grew $200 billion from last year.”

So what does this tell us?  If you're currently 36 or younger, you shouldn't plan on seeing a cent of the money you've been forced to invest into social security.  Thus, you must take precautions now to ensure a financially stable retirement, and here's how:

Start Saving as Early as Possible
The earlier you start saving money, the more time you have to not only save money, but make money on your savings.

Invest, Invest, Invest
Invest in your company's 401K, but go beyond that.  If you're stock market-savy, invest there.  If you're not, then take safer routes like:
        Certificate of Deposit Investments (CDs);
        Individual Retirement Accounts (IRAs);
        Money Market Mutual Funds;
        Stock Mutual Funds;
        Treasury Bills (T-Bills); etc.

Buy What You Need, Compromise on What You Want
Not only should you start saving early, but you should save as much as you can.  Buy what you need, but think twice about buying things that you want even if you can easily afford them.  The future is uncertain and you never know when you could lose your job or the economy could tank (as it has). 

Save, Save, Save
Make small changes in your life to save money.  Here are some examples:
        Cable.  The average American pays nearly $1,000 dollars for cable access every year; and that rate increases by 5 percent each year.  Switch to other cheaper, yet comparable options, like getting a media device and streaming television shows and movies. 
        Coffee.  Buy a professional coffee machine instead of going to Starbucks every day.  The quality will be just as good, and you'll save a bundle.
        Electricity.  Switch to energy efficient light bulbs, which can save you as much as 40% on your electricity bills over each light bulbs life.

Get Rid of Debt As Soon As You Can
It's easy to go through life making minimum payments on your credit cards.  Unfortunately, this is not only how people end up in debt, but how people end up still paying their debts into retirement.  Utilize financial educational resources, like Secured Credit Card Resource, and learn how to consolidate your debt effectively.  Knowing how to use credit and how to eliminate debt is imperative so that you don't end up using your retirement savings to get out of debt.  

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