Are you saving enough for retirement? How much is enough? Is there really such a thing as saving enough for retirement?
While there are a few rules of thumb that you can look at to find out how much money you need to save in your 401k for retirement, the sad fact of the matter is that we are simply not saving enough for retirement. Click here to learn more about Motif Investing
We Are Not Saving Enough For Retirement
Earlier this month, Fidelity Investments released its quarterly analysis of the 401k retirement plans that it manages. The report showed that the average retirement investor at Fidelity had an average 401k balance of $77,300. This is up 12% from the previous year if you count employer matching contributions. The problem is that this increase is simply not enough. The balances for most 401k retirement plans are far too low for the investors’ ages.
Life always seems to come along and knock people off of their retirement savings plan that they have set for themselves or have had a financial planner establish. That would not be too bad because we all know that Murphy is out there just waiting. But, we have compounded our problems by not saving enough for retirement in our 401k retirement plans like Fidelity found.
So, How Much Are We Really Saving?
According to the Fidelity report, here are the average 401k retirement plan account balances broken down by age group at the end of last year. Ages 50 to 54 had an average 401k account balance of $111,900. Ages 55 to 59 investors had $134,600. Those ages 60 to 64 had saved $133,100 in their 401k plans. And those investors who were 65 to 69 years-old only had $136,800 in their 401k plans.
These amounts are obviously not enough to retire on. For example, a typical annuity of $250,000 earning a 5% rate of return for a 20 year payout will only produce about $1,600 of income per month.
Even if you were to earn $2,000 from Social Security and/or a pension, you would still struggle to maintain the same standard of living that you have grown accustom to during your working years with only $250,000 saved for retirement. And, the savings are far lower according to Fidelity as we’ve seen.
According to the 2012 Annual National Survey Assessing Household Savings produced by the America Saves organization and the American Savings Education Council:
- 66% of Americans spend less than their income and save the difference
- Only 66% of Americans have sufficient emergency savings to pay for unexpected expenses
- Only 42% of Americans say they have a savings plan with specific goals
- 52% of non-retired Americans think they are saving enough for a retirement