Retirement Savings by Age and Income Helps 401k Participants Reach Retirement Goals
Retirement Savings by Age and Income measures can help your employees to answer the age-old question for American workers. How much should they be saving for retirement? Some experts recommend employees start retirement savings by age and income strategy between the ages of 20 to 29. At that age, the recommendation is to save 10% of their earnings – starting as early in their careers as they can. According to a 2017 study from the International Longevity Center — UK (ILC-UK) quoted by CNBC, people should set aside at least 11%, and ideally 20% of their pay in order to create adequate retirement income. According to the ILC this strategy of Retirement Savings by Age and Income should help participants to replace 70% of a retiree’s earnings throughout their retirement days. Personal finance guru Dave Ramsey recommends people save 15% of their household income for retirement.
Dave Ramsey is also fond of saying, no one wakes up one day surprised that they’re a millionaire. It may seem like the headlines are dominated these days by so-called “401(k) millionaires” — CNBC (article linked above) cited data from Fidelity that the number of accounts with balances of $1 million or more hit a record 168,000, up 41% from last year.
The 401k millionaires don’t just happen to one day notice that large balance in their retirement accounts. It’s the result of years of diligent planning and savings. Having a Retirement Savings by Age and Income strategy with your workforce can be an important idea to impress upon employees. A solid retirement nest egg doesn’t just build itself. It takes discipline, patience, consistency, persistence, and time — lots of it. Compounding is a powerful phenomenon. Albert Einstein referred to Compound Interest as the eighth wonder of the world! If you can impress upon your employees the concept that adequate savings today, plus time, equals a strong payout at retirement; and encourage people to stick with it for the course of their entire careers, they will be well on their way toward building financial security for the future.
Unfortunately, saving for retirement is a concept with which many Americans struggle. This is evidenced by data from Fidelity, again cited by CNBC. According to Fidelity, the average employee should have 10 times their final salary in savings if they want to retire by age 67. Fidelity offers another Retirement Savings by Age and Income strategy for getting there:
- By age 30: Have the equivalent of your starting salary saved
- By age 35: Have two times your salary saved
- By age 40: Have three times your salary saved
- By age 45: Have four times your salary saved
- By age 50: Have six times your salary saved
- By age 55: Have seven times your salary saved
- By age 60: Have eight times your salary saved
- By age 67: Have 10 times your salary saved
Unfortunately, the average American’s 401(k) balance doesn’t come anywhere close to these recommendations, as shown below:
When it comes to answering the question “How much should I save for retirement?”, clearly, there is no definitive answer. This explains why Americans are confused when it comes to understanding how to save enough today to create a sufficient income-stream for themselves in their post-work years. Retirement Savings by Age and Income helps by placing a structure and strategy around retirement savings. Retirement plan sponsors can help employees to get clarity on this by providing tools they can use to project their future retirement income and close any gaps in their savings. Accomplishing this is no easy task – but boosting your workforce’s overall financial literacy and encouraging employees to meet regularly with the plan’s financial advisor are preliminary steps in accomplishing this goal. If your retirement plan engages a retirement plan advisor, encourage plan participants to regularly review the numbers and address any shortfalls or areas of concern. Retirement Savings by Age and Income may be the savings strategy that can work for your retirement plan participants.
ARTICLE PRIMARY KEY PHRASE
“Retirement Savings by Age”
ARTICLE Network – Plan Optimization
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