Rosalind Evans
As more Americans near retirement, the question of financial security looms large. According to a new report, 49% of workers think they can meet their retirement goals, while 35% believe they will need over $1 million to retire comfortably.
Retirement Savers See Encouraging Trends
Recent data from Fidelity Investments suggests that overall, retirement savers are faring well. The second quarter of 2024 saw the third-highest average balances on record for 401(k) and individual retirement accounts, with the number of 401(k) millionaires hitting an all-time high.
Fidelity reported that the average contribution rate to 401(k) plans, including employer and employee contributions, is now at 14.2%, slightly below their recommended 15%. While these figures are promising, there remains a disconnect between what savers are putting away and their retirement aspirations.
Financial Realities and High Savings Expectations
A new Bankrate.com report found that 35% of Americans believe they will need more than $1 million to retire comfortably, with an additional 10% aiming for between $750,001 and $1 million. However, only 49% of people believe they will be able to reach their savings goal, while 48% admit they are unlikely to save enough by retirement.
“There are so many individuals, young, mid-career and deep into their career, that are not saving enough for a healthy and secure retirement,” stated Jacqueline Reeves, Director of Retirement Plan Services at Bryn Mawr Capital Management. This shortfall weighs heavily on workers, especially those nearing retirement.
Workers Falling Behind on Retirement Savings
A recent CNBC survey showed that 40% of workers feel they are behind on retirement planning. Contributing factors include debt, insufficient income, and starting their savings plans later in life. The survey found that baby boomers, closer to retirement, are more likely to regret not saving earlier.
“If you do less at 30, you’ll still have more at 60 than if you did more at 50,” said Reeves. The regret of not saving earlier is common, with 22% of Americans listing it as their biggest financial regret.
Overcoming the Retirement Savings Gap
Many experts believe that despite these challenges, it’s still possible to bridge the savings gap. Bankrate’s senior economic analyst, Mark Hamrick, noted, “Those who strive to prioritize retirement savings, as they should, have reason to believe they can achieve their goal. It takes information, focus, and hard work, but the good news is that it can be done.”
One strategy is utilizing automatic contributions and opting into an auto-escalation feature, which increases savings by 1% or 2% each year. For older savers, catch-up contributions offer an opportunity to boost retirement funds.
Meeting with a financial advisor is also highly recommended to create a sustainable plan. Free resources like the National Foundation for Credit Counseling are available for those needing guidance.
As Americans navigate an uncertain economic climate, it is clear that many face a gap between retirement goals and reality. While some workers are ahead of the curve, others are falling behind. However, with the right strategies, such as auto-escalation and catch-up contributions, it’s still possible to secure a comfortable retirement. For those needing help, consulting a financial advisor or utilizing free counseling resources is a critical step toward achieving financial stability.
