On Track For Retirement? Think Again.

A new study from Stanford researchers says Americans should be saving this much if they want to enjoy their golden years.
A woman puts a coin into a piggy bank

The dream of retirement helps power millions of Americans through dull status report meetings and long hours of overtime. It’s a promise that the endless amount of work will eventually lead to stress-free days filled with leisure. But it seems too many of us view retirement as something that simply happens and not as a new stage of life that requires decades of advanced planning. A new report by Stanford's Center on Longevity finds almost half of American workers aren't putting aside enough of that paycheck to ensure they won’t be working a side hustle past retirement age..

How much should you save for retirement ?

When President Roosevelt signed into law the Social Security Act in 1935, the average life expectancy of an American was almost 62 years. Thanks to advancements in medical science in the eight decades since, we're living longer than ever, with the average life expectancy reaching around 79 years. But because we don't succumb to polio or scarlet fever quite so easily, that means we need our financial nest egg to last longer than ever. The research from Stanford recommends any American planning to retire at age 65 should be saving 10% to 17% of their current income each year starting at age 25—and that's assuming a steady contribution year after year, without any breaks allowed for getting laid off or fired. Those who didn't start saving until 35 face an even more austere regimen: an aggressive plan that recommends saving 20% of their income in order to retire at 65 and live out the rest of their days in their accustomed lifestyle.

Retire atStart Saving at Age 25Start Saving at Age 35Start Saving at Age 45
6517%20%25%
6714%16%20%
7010%12%14%

How to get back on track for retirement savings

With 40% of Americans unable to cover an unexpected $400 expense and even those considered middle class having trouble making ends meet, socking away more of the paycheck for retirement feels about as possible as winning billions in the lottery. However, you can take some concrete steps toward preparing yourself for a long—and comfortable—old age including:

  • Matching your employer's contribution to your 401K. For those of you lucky enough to work someplace where your employer will chip in to a retirement savings fund, you need to make matching their contribution a priority. If they're offering to match up to 5%, put in 5% of each paycheck. Anything else is just leaving their money on the table.
  • Setting up an IRA. No, becoming an Irish revolutionary won't help you reach your retirement goals. But an individual retirement account (IRA) can help you save money for when you're ready to retire and give you several tax advantages. Different types of IRA accounts come with a different set of pros and cons, which you can read about here to help you choose which one is right for you.
  • Cutting your spending. Easier said than done, trimming your expenses where you can is always a surefire way of stretching a dollar. While selling all of your possessions and living like a monk will almost certainly guarantee you hit your retirement goals in record time, a good budget can help you find the middle ground between reckless spending and a life worrying about your financial security.
James Ellis

James Ellis is a Staff Writer for ValuePenguin, covering credit, banking, travel and other personal finance topics. He previously wrote for Newsweek, Men's Health, and other nationally-published magazines.

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