Retirement crisis: Do you have enough saved? Here's how to tell
It’s no secret that the majority of American workers are struggling to reach retirement savings goals.
A new study by professional services firm Aon found that two in three workers fall into that category.
What’s worse, more than 46 percent of workers were actually “significantly” below – which was measured as more than four times pay below – their savings targets. Another 20 percent fell into the two- to four-times below target category, while 15 percent were two times, or less, below their retirement goals.
On average, workers – including employer contributions – are saving about 12.6 percent of their pay for retirement accounts. That compares with the 16 percent that Aon recommends workers put away in order to retire comfortably by the age of 67.
The median employee expects to be able to retire by the age of 70, according to Aon, but that may not be feasible for all workers.
For younger workers, the problem is even more pronounced as retirement benefits and pensions plans have decreased over time. While 73 percent of workers were eligible to receive a pension in 1996, only 8 percent could by 2017.
Additionally, medical costs – a big source of retirement spending – are projected to continue to increase over time. Overall, Aon found that the younger an employee is, the more they were likely to fall into the “significantly below” target category – including 55 percent of individuals in their 20s.
Industry can also influence a workers’ retirement readiness. Those in aerospace, energy and oil, for example, were more likely to be able to retire by the age of 67, compared with workers in food service, retail distribution and some hospitality professions – whose retirement target was 75 or older.
The Trump administration and conservative lawmakers have sought to help Americans save more for retirement, including a new effort to increase age contribution limits for individual retirement accounts (IRAs).
For 2019, the Internal Revenue Service raised contribution limits to $19,000, from $18,500, for 401(k) retirement plans. For IRAs, that number – which hadn’t been raised since 2013 – increased to $6,000 from $5,500.
There are also ways older Americans (ages 50+) can increase savings through catch-up contributions – which allows for an extra $6,000 to be put into a 401(k).
The level of funding in an individual’s IRA account could also help boost Social Security checks. According to a study by the Journal of Pension Economics & Finance, more than 34 percent of people who began taking benefits at the age of 66 had enough funds in their IRA to delay claiming Social Security for two years, while about 25 percent were capable of delaying for four additional years.
Delaying Social Security until the age of 70 could increase a retiree’s lifetime income stream by as much as 32 percent.