If you’re like most people, one of your retirement concerns might be how much to save. If you haven’t put away as much as you should in your retirement nest egg, you’re not alone. A study conducted by the Stanford Center on Longevity revealed Americans are saving roughly half of what they should for retirement.
Stanford’s research also revealed as Americans get older, they are moving in the wrong direction not only when it comes to retirement planning but also health habits and social connections. “Americans are more sedentary today than in generations past and fewer report being socially connected within their communities compared to 20 years ago. The most prominent downward trends, however, emerged in the domain of financial security,” said the researchers.
- Young people are having a tough time saving for retirement. The researchers found members of the younger generations (millennials and Generation X) are failing to meet retirement savings goals more than older generations.
- Education matters when it comes to retirement savings. When assessing each age group, retirement contribution rates are higher among people with higher education levels and income.
How much should you save for retirement?
If you want to retire by 65, it’s best to start early and save as much as you can. According to the report, retirement experts generally recommend saving between 10% and 27% of your income, depending on the age you start saving, if you’re looking to retire at 65.
Retirement savings by age
- 25 years old—If you start saving at 25 and you’re a medium-income earner who wants to live on 70% of pre-retirement income, you’ll need to contribute 10% to retirement plans every year if you want to retire by age 65, say the researchers at the Boston College Center for Retirement Research.
- 35 and 45 years old—If you wait to start saving until age 35 or 45, you’ll need to save 15% and 27% of your income, respectively.
The Stanford researchers found millennials and GenXers are only saving roughly 7% to 10% percent of income toward retirement, respectively, and boomers are saving about 9% to 10%. “It’s likely many Americans will need to adjust their spending but can nevertheless experience a comfortable retirement. In contrast, many others will likely face a financial crisis at some point during their retirement. Our results suggest that, at the very least, making any increase in retirement contributions is progress in the right direction,” said the researchers.
Weighing retirement options
Those who hope to maintain their current lifestyle during retirement have a lot of hard work ahead of them. The study shows most workers can’t fully retire by 65 under their pre-retirement standard of living. Consequently, some retirees will need to find creative ways to figure out how to survive retirement. The researchers say retirees will most likely have to consider alternative retirement strategies, such as working past traditional retirement age, lowering their standard of living in retirement, withdrawing less money during retirement, or a combination of these options.
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