Are you concerned that you aren't saving enough for retirement? Well, you're not alone. In fact, more than one-third of Americans haven't started investing for retirement yet. About 75% of Americans over the age of 40 are also behind on their retirement savings, so it's time to break the statistic. We've come up with some common warning signs that you may not be saving enough and need to increase what you're investing.
1. You Don't Have Specific Goals in Mind
First, you need to figure out what the minimum is that you'll need to retire. This will allow you to properly plan your retirement and ensure you are meeting your benchmark goals. Work on determining a target retirement age and goal amount so that you can develop a savings plan on your own or with a skilled professional.
It's also important that you know what you'll get from Social Security so that you can plan what you need to save above that. Lastly, work on an estimated monthly financial plan so that you have some idea what you'll be spending on monthly bills and debt payments.
2. You Don't Know How Much to Save
Most professionals recommend saving at least 10% of your gross salary, if you've been saving since your 20s. However, if you don't start saving until your 30s, Schwab recommends upping that contribution to 15%–25%. If you start in your 40s or later, you would want to save 35% of your income, which is a rather hefty amount. This is all thanks to the power of compounding interest, so it's never too early to start saving.
3. You Aren't Matching Your Employer's Contribution
If your employer is matching your 401K contribution, that is basically free money invested in your future. That's why it's crucial to at least match your employer's contribution, so that they can help you prepare for your retirement as much as possible.
4. You've Borrowed From Your 401K
Borrowing against your 401K is never a good idea. It may help in the short-run, but in the long-run, it can affect your savings goals and financial health during retirement. You would also need to save more aggressively going forward just to catch up with your original savings goals.
5. You Aren't Prioritizing Your Future
One of the first things you should always think about is building savings for yourself so you have the money you need in case of an emergency or unexpected expense. Short of that savings account, you shouldn't be prioritizing anything over your retirement savings. Your retirement and your future should be your first priority, even over your children's education, because nobody will be saving for your retirement except for you.
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6. You're Only Investing in a 401K
Contributing to a 401K is a great start to your retirement savings, but it usually isn't enough. Your best bet is to diversify your portfolio, investing in both a 401K and an IRA or Roth IRA. This will ensure you are well prepared for your golden years. (See also: Which Retirement Account Is Right for You?)
7. You Aren't Accounting for Inflation
On average, inflation rates linger around 3%, which means that your expenses will double in less than 25 years. You will need to account for this, as it's one of the biggest retirement planning mistakes anyone makes.
8. You Haven't Sought Advice
You may not necessarily need a financial planner, but that doesn't mean that you shouldn't seek advice on your retirement portfolio from time to time. For instance, have you diversified properly? Are you investing in the right types of investment products? Have you adjusted your portfolio to match the appropriate level of risk and reward for your age range and lifestyle? These are some of the many questions you need to ask yourself (and/or a professional) to ensure you are saving and planning correctly. (See also: Do You Need a Financial Planner?)
9. You Haven't Started Saving Yet
The sooner you start investing in your future, the more you'll have by retirement, thanks to compound interest. This also means that the sooner you start saving, the less you'll need to save every month to have enough in your retirement years. (See also: Stop Making These 10 Bogus Retirement Savings Excuses)
10. You're Worried About Retirement
Possibly the most obvious sign that you aren't saving enough is that you feel very nervous about retirement. If you don't think you're saving enough, then you probably aren't.
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After decades of accumulating enough money to retire, it can be psychologically and emotionally challenging to spend down that money and watch your nest egg get smaller each year. "They are going to feel like they spent a lifetime accumulating this pile, and the idea of spending this down is just repulsive to them," says Alicia Munnell, director of the Center for Retirement Research at Boston College and co-author of "Falling Short: The Coming Retirement Crisis and What to Do About It." "For anyone who is retiring, I would give them permission to spend their money," she says.
Saving enough to retire is not your final goal. You should also develop a plan to make that money last the rest of your life. "You need to understand how you can minimize your risk in the portfolio, but you also need a component of that strategy that gives you growth because you need to stay ahead of inflation and taxes," says Laura Mattia, a certified financial planner and wealth management principal for Baron Financial Group in Fair Lawn, New Jersey.
Social Security is a significant source of income for most retirees. Almost all retirees (86 percent) receive income from Social Security, and Social Security payments make up at least half of the retirement income of 65 percent of retirees and comprise 90 percent of retirement income for 36 percent of retirees. "Most seniors do not have much income other than Social Security," says Nancy Altman, co-director of the Strengthen Social Security coalition and co-author of "Social Security Works! Why Social Security Isn't Going Broke and How Expanding It Will Help Us All." The average monthly retirement benefit was $1,282 in December 2014.
High medical care bills don't go away once you qualify for Medicare. Although Medicare covers a large amount of the medical treatments older people need, there are several popular services that it doesn't. For example, Medicare won't cover routine eye exams, eyeglass, dental care or hearing aids. And Medicare only covers up to 100 days in a nursing home. Retirees who require additional long-term care will need to find another way to pay for it. And while many preventive care services are covered by Medicare with no cost-sharing requirements, if something concerning is found, additional tests and procedures will be considered diagnostic, and copays and coinsurance are likely to apply. "You really need to understand what health benefits you can receive from Medicare and check how it will cover any ongoing health issues," says Christopher Rhim, a certified financial planner for Green View Advisors in Norwich, Vermont.
Without a job to go to every day, you could find yourself spending an increasing amount of time alone. Some 44 percent of Americans ages 65 and older live alone, according to U.S. Census Bureau data. Unless you sign up for a volunteer position or make an effort to socialize on a regular basis, you could become bored and lonely.
If you outlive your spouse or divorce, you might find yourself single again in retirement. While just over half (55 percent) of Americans age 65 and older are married, the rest are widowed (28 percent), divorced (12 percent), separated (1 percent) or never married (5 percent), according to census data. Some of these single seniors begin meeting new people and dating. There are a variety of online dating services that cater to people over 50.
As attractive as it sounds to move to the Sunbelt, most retirees don't relocate for retirement. Only 5.7 percent of Americans age 65 and older moved to a new residence between 2009 and 2013, and the people who do move most often relocate to the same state and even the same county, the Census Bureau found. Only 1 percent of retirees moved to a new state, and just 0.3 percent went overseas. Relocating to a new community in retirement often means leaving behind family and a support system that can be difficult to rebuild in a new place.
While the act of aging is an expected part of retirement, the loss of independence typically isn't as welcome. There may come a time when you can't drive, shovel your own walkway or climb on a chair to change a light bulb. You may even eventually need help with meals and bathing. Although the beginning of retirement is often full of fun and adventures, it's also a good time to make contingency plans for later down the road when you might not be able to care for yourself.
Retirees spend over half of their leisure time watching TV. Seniors ages 65 to 74 tune in for 3.92 hours on weekdays, and those 75 and older watch TV for an average of 4.15 hours each day, according to the 2013 American Time Use Survey by the Bureau of Labor Statistics.
Compared to the overall population, retirees ages 65 to 74 spend extra time lingering over meals, working on home improvement or garden projects and shopping, the American Time Use Survey found. Retirees also spend more time reading, relaxing and volunteering than younger folks.