The odds that you'll retire are in your favor, but they aren't as great as you'd think.
According to a recent Google survey study conducted by GOBankingRates, a third of U.S. workers say they have no retirement savings. None. Zero. Yes, that's bad, but the 23% who have less than $10,000 saved aren't faring much better. According to GOBankingRates survey responses, J.P. Morgan Asset Management checkpoints and Census Bureau data on median incomes by age range, a 30-year-old making the median $54,243 should have about $16,273 saved. Not surprisingly, roughly 67% of workers that age are well behind that goal.
"There are plenty of obstacles Americans claim are in their way when it comes to saving for retirement: credit card debt, student loan debt, low wages, the need to save for a child's college education, and the list goes on," says Cameron Huddleston, life and money columnist for GOBankingRates. "Although all of these things can put a strain on our budgets, they don't necessarily make it impossible to save for retirement."
If any of this seems oddly familiar, it should. Last year, a study by financial services firm Edward Jones found that 45% of U.S. workers haven't begun saving for retirement. Of that group, only 36% plan to do so in the future and almost 10% say they never plan on saving for retirement. That former number includes 58% of workers 18 to 34 who have not even started a retirement fund, which GOBankingRates and J.P. Morgan says should happen by age 24.
"When it comes to retirement savings, there’s a big difference between planning to save and actually doing so," said Scott Thoma, principal and investment strategist for Edward Jones. "While intentions to save forretirement are legitimate, individuals tend to satisfy more immediate, short-term spending goals and push off their long-term saving goals. This behavior can be incredibly detrimental for individual investors, particularly as they enter the critical savings periods of their 30s and 40s when they have (and unfortunately waste) a tremendously valuable asset - time."
Meanwhile, a survey by financial firm Franklin Templeton last year discovered that 55% of workers are considering working during their retirement and 30% of those ages 18 to 24 never plan to retire. It doesn't help that many workers have no idea how much inflation can affect the amount they need to retire. Franklin Templeton's survey of retirees found that pre-retirement spending actually increases 28% one to five years into retirement, 42% six to ten years in and 44% 11+ years down the line. That averages out to a 37% hike across the board, which may be bad news for the 36% of workers who think they'll be able to live on 70% of their current income or less (despite the fact that 45% of retirees do so).
“Conventional thinking and attitudes about what it means to retire are changing,” says Michael Doshier, vice president of retirement marketing for Franklin Templeton Investments. By taking action now—via saving and planning for retirement—individuals can help ensure that they're able to embrace this next phase of life.”
This is easier in theory than in practice. Though GOBankingRates notes that 13% of workers have $300,000 or more saved for retirement, about 30% of those age 55 and over have no retirement savings and 26% have less than $50,000. In fact, only 26% of Baby Boomers nearing retirement age have $200,000 or more, while 31% of Boomers over 65 can say the same.
That still beats the 52% of Generation X (ages 35-54) who still have less than $10,000 in retirement savings after the recession wiped out 45% of their net wealth on average, according to Pew Research Center. Roughly 31% of Gen X-ers have no retirement account at all, though 40% of Gen X-ers over 40 have more than $50,000 in retirement accounts. Among that group, 7% have between $200,000 and $300,000 socked away, while 15% have $300,000 or more. Meanwhile, though 60% of Millennials (18-34) have started a retirement fund, 72% have saved less than $10,000 or nothing at all. A full 42% have no retirement savings, though that percentage shrinks to just 36% of those older than 25.
Edward Jones noted that 90% of its study's youngest respondents said they planned to or began saving in their 30s or earlier. However, only 64% of respondents ages 35 to 44 actually began saving in their 30s. Roughly 22% of all respondents say they began saving between the ages of 40 and 50. Meanwhile, having children puts a severe crimp in those plans. Only 39% of workers in single-person households indicated that they are not currently saving, compared to 51% in a household three or more. Along the same lines, 58% of those without children have already started saving, compared to 49% with children.
"Parents are recognizing the need to save earlier in order to account for additional costs, like education," Thoma says. "We cannot emphasize enough the importance of saving for retirement early and often – it leads to higher future income in retirement, with less stress and uncertainty while working to achieve those goals.”
Considering that 75% of workers over 40 are behind on their retirement savings, according to GoBankingRates, it's best to get started early and catch up when life allows. If you can start consistently contributing money to 401(k) and IRA accounts, pay down debt and use the catch-up provisions that allow for bigger contributions to retirement plans by people over 50, you can put yourself in a much better position.
"The real problem is procrastination," Huddleston said. "People naturally tend to focus on the bills that are due today -- and the things they want now -- and assume they'll have time to save for retirement later. But, before you know it, 20 or 30 years have passed; you're approaching retirement age but you don't have enough saved to retire."
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.