The average American will never retire at the rate they’re saving.
Right now, 63 percent have less than $5,000 saved. And if handed that much money, only 23 percent would put it towards retirement.
Not saving for the future
It’s not that Americans don’t want to save for retirement, it seems many have higher financial priorities today.
Given an unexpected $5,000, most Americans (55 percent) would use it to pay their bills, or a debt (41 percent). When considering how to disperse their newfound jackpot, Americans would put half (48 percent) into savings, spend 42 percent, then give 10 percent away to charity, according to PenFed.
And it’s not that Americans flat out don’t save — they just don’t save enough. Only 18 percent of Americans say they never save money. Then 61 percent save on a monthly basis, while 82 percent save on a yearly basis.
PenFed didn’t determine how much Americans save during those time periods. However, Americans should set a goal to save 25 percent of their salary before taxes are removed while in their 20’s, according to a report from CNBC. Then, by your 30’s, you should have the same amount as your annual salary saved. So, if you earn $40,000 a year, that’s the amount you should have saved before 35 — you should aim for double by that age, according to CNBC.
But, 69 percent of Americans have less than $1,000 in savings, according to a 2017 survey from GOBankingRates. While, 39 percent report not having any money saved, according to its survey.
Interestingly, the amount of Americans who prioritize using that unexpected windfall for something frivolous isn’t far behind those saving for retirement. Nineteen percent say they’d treat themselves to a vacation. However, 14 percent would buy a car, and another 14 percent would use it for education costs, according to PenFed.
Stephen Simpson, who leads PenFed’s wealth management division, seems to disagree with those who would vacation, and thinks they should set realistic financial goals.
“Saving the extra money you receive whether through a bonus at work, inheritance, raise, or those months where you get three paychecks, is crucial to reaching your financial goals,” Simpson says. “If you need to pay the bills, that’s important. But consider putting a little of that money away for short-term emergency needs or retirement.”
We need how much saved for retirement?
It’s been referred to as the million dollar question by both NerdWallet and CNBC. With good reason too. The answer is based on how comfortable of a life you plan to live in retirement, but for safe measure AARP recommends saving $1 million to $1.5 million for your golden years.
At the rate Americans sock money away, retirement could seem like an impossible goal to reach. Almost a quarter (22 percent) of Americans said their greatest financial fear is never being able to retire, according to a separate GoBankingRates survey. Then in 2015, Career Builder released a poll revealing that 12 percent of 60-year-old workers didn’t think they’d ever retire, and another 54 percent said they’d continue working, even after retirement from their current career.
Prolonging retirement may be the answer for some Americans. For those not saving at all — that will guarantee they never stop working. But, as Simpson simply explains, every little bit will help in the long run.
“It’s hard to think about retirement when it seems so far away,” Simpson says. “But if you start saving a small amount today, it will add up for the future.”
Originally published at www.debt.com on May 4, 2018.