OAK BROOK, Ill. — Americans may be working hard, but many simply aren’t doing enough to save for retirement. A recent national survey showed that more than one-third of Americans have not yet begun saving for retirement in any significant way. In honor of National Save for Retirement Week from Oct. 19 until Oct.25, the Illinois Municipal Retirement Fund (IMRF) encourages all Americans to take stock of their retirement readiness, and — if necessary — start saving more.
36 percent of workers in the country have less than $1,000 saved and invested for retirement
The survey, conducted by the Employee Benefit Research Institute and Greenwald and Associates, reports that 36 percent of workers in the country have less than $1,000 saved and invested for retirement – and an additional 60 percent of workers have less than $25,000 saved. IMRF, the second-largest public pension plan in Illinois with more than $33.2 billion in assets, recommends that all individuals organize their finances, devise a budget and increase savings levels to ensure a comfortable retirement. "The research shows that most Americans are not saving enough to live 20-30 years in retirement," said IMRF Executive Director Louis W. Kosiba. "The good news is that everyone can begin to save at any age, whether they’re 21 or 51 years old. Just as IMRF uses sound investment principles, we encourage all Americans to save and invest a portion of their income."
IMRF has identified seven tips that individuals can implement today to increase their retirement security and feel more confident about their future:
- Create a budget. Simply organizing your monthly expenses can help you stay on track when saving for retirement. Many people underestimate how often they withdraw for unexpected costs. Having your expenses laid out in front of you can help you determine necessary expenses, as well as figure out where to cut back. Make your own spreadsheet or use online tools such as Mint.com that remind you of upcoming bill payments and send an alert if you are close to exceeding your monthly budget.
- Find out if you are on track. On average, Americans are saving only 6.4 percent of their annual income for retirement, according to a Capital One ShareBuilder survey. For most individuals, this is not nearly enough. Retirement investment calculators (such as the one found on CNN Money) can allow you to project your savings to see how much you will have available at your desired age of retirement. A view into your future can help determine if you are on track for retirement – and let you know if you should be saving more.
- Create an IRA account ASAP. Traditional individual retirement accounts (IRAs) are tax-deductible, and withdrawals at retirement are taxed as income. Contributions to Roth IRA accounts are made with post-tax assets, and withdrawals are usually tax-free.
- Consider an auto-investing mutual fund. Forty percent of American workers do not have access to workplace retirement plans (U.S. Department of Labor). If your company does not offer a defined contribution plan, or 401(k), consider an auto-investing mutual fund, such as Vanguard or Fidelity. These direct investment companies automatically deposit your earnings into a retirement or a savings account, making it easy to save and collect investment returns.
- Save more. Most people only contribute 3 percent out of every paycheck to their 401(k). That’s not enough to guarantee a secure retirement. Slowly increase your contribution every few years – especially if your salary increases. A gradual contribution increase may not seem like much in the beginning, but can add up to thousands in savings at the end of a career.
- Save smart. Small purchases add up quickly. Forgoing a daily small latte can save more than $1,400 annually. Look for small expenses that are easy to "do without," such as eating meals at home or walking to the grocery store instead of driving, to help save more for your retirement nest egg.
- If you have debt, pay it off ASAP. Sort your debt from the highest to the lowest interest rates, and then pay off the most expensive debt first. Always pay more than your minimum balance on your credit card statements. If you have a high-interest credit card, consider transferring the debt to a card that offers a zero-interest balance transfer. Just remember to pay off the debt before the transfer expires.
"Everyone should focus on saving for retirement," Kosiba said. "Planning ahead will lead to greater rewards down the road."