In the EBRI study, respondents were all over the map in estimating how much to save, with some workers aiming at 30% or more (23% of respondents) and 20% saying they were aiming to save 20-29% of their income for retirement. "Aggressive as those savings targets appear to be, they may not be based on a careful analysis of their individual circumstances," explains Jack VanDerhei, EBRI research director and co-author of the report. "Only 46% report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement." One retirement investment that can help, but is significantly underused by investors, is the venerable individual retirement account, or IRA. A survey from TIAA-CREF, a New York City financial services firm, shows that many of the 1,000-plus adults surveyed "continue to overlook IRAs as part of their retirement savings plan." The firm says that 80% of U.S. workers aren't contributing to an IRA, up from 76% in 2012. More disturbing, at least to financial advisers and economists, is that 43% of Americans lack a basic understanding about IRAs and how they are used. That's a pity, TIAA-CREF says.
The firm points out that an IRA is one of the best tools in a retirement saver's toolbox. In 2013, Americans can save up to $5,500 (or $6,500 for U.S. adults over age 50) in an IRA on a tax-advantaged basis. Yet only 33% of Americans are aware of the maximum contribution levels are on IRAs, the survey says.
TIAA-CREF has a creative IRA strategy of its own: It offers a guaranteed income for life option and says 100% of its funds are rated three-stars-or-higher by Morningstar. Whether you go through a small credit union or a major funds group, take your time -- making the right decision trumps any rush you might feel to get going on an IRA, TIAA-CREF advises. "When it comes to making decisions such as how to maximize your tax benefit through an IRA, individuals need to find the right advisor to help them navigate through vast amounts of information," Keady says. "What works for one person won't necessarily work for another."