Posted on Jul 21, 2023
Saving for retirement is not just a prudent financial choice but an essential one for most Americans. Social Security is a safety net but is not meant to be the sole support for people when they retire, and the monthly benefits may not be enough to maintain a desired standard of living. Personal savings, investments, and employer-sponsored retirement plans such as 401(k)s ensure a more secure and comfortable retirement.
According to the U.S. Bureau of Labor Statistics, 69 percent of employees in private industry had access to employer-provided retirement plans in March 2022. Out of these workers, 52 percent chose to participate in a retirement plan, resulting in a take-up rate of 75 percent (the percentage of workers with access to a plan who actually participate). State and local government workers had a higher participation rate; 92 percent had access to a retirement plan and 82 percent of them chose to participate, leading to a take-up rate of 90 percent.
With inflation causing an erosion of purchasing power and a significant threat to the value of money over time, it’s more critical than ever for workers to save for the future. Without adequate retirement savings, individuals risk losing the ability to maintain their desired standard of living once they leave the workforce. Moreover, economic uncertainty, market volatility, and unexpected events such as a job loss or economic downturn highlight the importance of building a retirement safety net.
How much are Americans saving? Fidelity reports that in the first quarter of 2023, the average 401(k) savings rate among all workers, Boomers through Gen Z, is 14 percent of annual salary, and the average 401(k) balance is $108,200. It’s no surprise that Boomers’ average balance is higher, $215,000, as individuals in this cohort are closer to retirement age. Unfortunately, there is still a wide gap between what women have saved on average ($87,600) compared to men ($129,300) even though their savings rate is nearly the same. Lower salaries and part-time work and career interruptions due to caregiving responsibilities contribute to this gap, but women typically have longer life expectancies compared to men and need to stretch their retirement savings over a longer period.
For younger workers, retirement may seem like a long way off. But saving a percentage of salary early and consistently is the key to building a substantial retirement fund and empowering individuals to achieve financial independence.
This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.Back to Blogs Helpful Resource Links