Have you accumulated a nest egg for your retirement years? If you have a stash that is over $25,000 without counting your home or any defined benefit plan (pension), you are better off than more than half of the respondents in a recent survey. Even if your nest egg is only just over $1,000, you are better off than 28% of workers. This sobering finding is part of a fact sheet released by the Employee Benefit Research Institute (EBRI) as part of the Retirement Confidence Survey (RCS).
Continue Reading Below
The lack of a nest egg is strongly associated with the lack of a traditional retirement savings vehicle. Of those who had no IRA, defined contribution, or defined benefit plan, 64% were in the category that reported having less than $1,000 in a nest egg. However, respondents who reported having one of these plans were spread out across the spectrum of nest egg value. 20% of those with a plan had over $250,000 in their nest egg, and 17% had between $1,000 and 9,999 in theirs.
In short, having a retirement savings vehicle does not guarantee you will have a large nest egg, but not having a retirement savings vehicle makes it highly likely that you will have little or no nest egg.
Employer-sponsored retirement plans such as 401(k)s are the primary driver of retirement savings, with 71% of the employed workers being offered a retirement savings plan and 83% of that group contributing money to their employer-based plan. Further, those with employer-based retirement plans are likely to have alternate retirement sources as well. Viewed as households, 63% of respondents that have money in an employer plan also have household money in an IRA, and 49% have a third source of retirement savings.
This drives home the importance of having a suitable retirement vehicle to establish the mindset of saving for retirement. Once you start a plan, you look for other ways to save for retirement to complement your plan.
While two-thirds of the workers in the survey have saved some money for retirement, along with 78% of full-time workers, this leaves far too many workers without sufficient savings for retirement or a sufficient mechanism to help them acquire those savings.
The RCS found that 64% of workers feel behind in their retirement savings, but only 48% have tried to calculate how much money they will need in retirement. Based on the above findings, more people are likely to feel behind if they bothered to make the calculations.
Aside from lack of a sufficient savings vehicle, what keeps people from saving more toward retirement? Debt and the combined effects of day-to-day expenses and the rising cost of living are the main reasons. Over half of working respondents and almost one-third of retired respondents reported having debt problems.
Whether the issue is debt or day-to-day expenses, the secret to getting out of debt and adding to retirement plans is to get in the saving mindset and adopt a budget that allows you to save based on your situation. Most acknowledge that they could easily save more — 69% of respondents said they could save an extra $25 per week, with half of those saving on eating out.
Some workers may think they can simply work longer and take care of their own needs, but they do not always have control of that option. The survey found that 67% of workers expect to do some work for pay during retirement, but only 23% of retirees actually do. Half of retiree respondents left the workforce earlier than expected (60% of those from health/disability reasons and 27% from employer closings or downsizings).
If your retirement is underfunded, start by taking full advantage of any employer-based retirement programs and then work on your budget to trim expenses. Prioritize your nest egg over your daily expenses, and before you know it, you will have accumulated enough funds to open an IRA — and gained momentum in the process. If you make it to that point, you will have acquired the necessary savings mindset and the peace of mind of a more secure retirement.
More from MoneyTips.com: