Americans are growing increasingly concerned over their ability to afford to retire, and with good reason.
Continue Reading Below
Data from the Employee Benefit Research Institute shows that only 46% of individuals have attempted to calculate how much they need to save for retirement to live comfortably. Another 57% of respondents report their total household savings and investments, excluding their home, is less than $25,000. Only 50% said they could definitely come up with $2,000 if a sudden expense arose. The silver lining to these numbers is that consumers are looking for ways to improve their budgeting and savings habits to help shore up their retirement savings.
The good news is that it's never too late to begin saving for retirement, but individuals will need to act aggressively to develop a comprehensive plan. The first step to any retirement plan is to calculate how much needs to be saved. Individuals can rely on a retirement calculator to determine the amount they will need for their post-working years, or they can work with a financial advisor or credit counselor to get a more comprehensive figure. It's also important that consumers calculate overlooked costs into their savings plan, such as health-care expenses which tend to increase as they age.
A Lifestyle Change can Yield Positive Results
Consumers can also start amassing more wealth by overhauling their lifestyle and focusing on a more disciplined money management plan. Paying off debt is essential, because unpaid balances and interest charges during retirement can quickly eat into money that is saved and make it more difficult for individuals to meet their needs. One way to make larger payments toward debt, while staying on course with a savings plan, is to live on less money. This includes curbing unnecessary purchases and spending, doing away with high-priced amenities, such as pricey cellphone and cable packages, and paring back on vacations, food bills and the like. In more dire cases, consumers might consider downsizing their homes or vehicles to lower their monthly payments, maintenance charges and other add-on costs.
Lastly, workers who are approaching retirement should be maxing out contributions to an employer-sponsored plan or IRA. While traditional savings is important to building a liquid retirement fund, tax-advantaged accounts are also central to a well-balanced retirement plan.
Continue Reading Below
Howard Dvorkin, CPA, is the founder of ConsolidatedCredit.organd PowerWallet.com and is a personal finance expert and consumer advocate as well as the author of Credit Hell: How To Dig Out of Debt.