Posted on Jul 26, 2019

When you’re in your twenties and thirties, retirement seems like a long way off. Steve and Kim, both Millennials with a new house, two cars, and a baby on the way, could barely fathom how they would meet all the financial responsibilities of being homeowners and soon-to-be parents, much less save for retirement. Their combined gross income of $125,000 put them solidly in the middle class. However, they also lived in an expensive New England state.

“We make decent money, but after taxes and all the bills, we really don’t put much aside in our savings account,” Steve said. “It seems like every month there’s always an extra expense, whether it’s a car repair or something we need for the house. When the baby is born, it will be even tighter. I know we should start saving for retirement, but we’ve kind of put it on the back burner for now.”

The problem is, the back burner becomes the front burner sooner than you’d expect, with very troubling consequences. A report published in May 2019 by the Federal Reserve found that nearly a quarter of non-retired American adults have no pension and no retirement savings at all. Moreover, only 36% of non-retired adults think that their retirement saving is on track.[1] While Social Security provides an income stream for many retirees, it was never meant to be a sole means of support and typically replaces only 40% of an average earner’s income. And given that pensions, or defined contribution plans, are rare and going the way of the typewriter, more and more Americans will only have employer-sponsored 401(k) or 403(b) plans, IRAs, and their own savings to supplement any Social Security income.

But how can you save for retirement when you have bills to pay? It’s all too easy to prioritize other expenses, but the important thing is to start saving, even if you begin by putting aside just a small percentage of your pay. Take advantage of any company-sponsored retirement plan for which you’re eligible. If your employer offers a matching plan, for example, it’s “free money” if you meet the match. If your percentage is automatically deducted from your pay, you won’t miss it. You’ll see how your account grows with the magic of compounding interest.

Other tips to consider: 

  • Aim to increase the percentage you contribute to your retirement plan, up to the maximum permitted. If you are over age 50, consider the allowed catch-up contributions.
  • Remember that if you are contributing to a traditional 401(k) plan or 403(b) plan and your contributions are pre-tax, your take-home pay will not drop by the same amount you contribute. There are several online calculators to show what your take-home pay will be with pre-tax contributions.
  • Automate, automate, automate. Make your retirement contributions an automatic deduction so you don’t have to think about it.
  • Educate yourself on Social Security and retirement planning and set a savings goal. Review your goal and your account on a regular basis to stay motivated.
  • If you still think there’s no way you can save for retirement, take a close, hard look at your budget and your spending. Chances are there are some ways you can cut back and allocate money for retirement.

Remember, the sooner you start, the better off you’ll be and your future self will thank you. You don’t want to be one of the many retirees someday whose top regret is not saving sooner and not saving enough.

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.


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