We think of retirement as a relaxing, carefree time in our lives when we can do what we want, but for many who work Americans today, retirement will be more a nightmare than a dream. Studies after studies have shown that many Americans are well behind where they should be in terms of retirement savings, and if they do not take steps today to fix this, they may end up running out of money or working far beyond their schedule. .
Here are some of the most shocking statistics on the Americans' pension savings and some advice on how to get back on track.
1. One in three Americans has less than $ 5,000 in retirement savings
A Northwestern Mutual Study found that one in three Americans has less than $ 5,000 saved up for retirement, and 21% of Americans have no retirement savings at all. Whatever the reason for their lack of savings, the result is the same. When they start saving, these people have to put up much of their income every month to get enough for retirement because their savings will have less time to be compounded before they need to start drawing on them. Alternatively, these workers may need to be in labor a little longer than they planned.
2. The Average Pension Cost of the Household Pension is $ 50,000
The latest Transamerica pension survey states that median retirement savings for all US households are $ 50,000. This figure is higher for older generations, with baby boomers having a median of $ 152,000 in retirement savings and Gen Xers has a median of $ 66,000. Millennials currently have the lowest median retirement savings of $ 23,000, but they also have the most time left to save before retirement.
3. Americans leave $ 24 billion in unsolicited 401 (k) matches on the table
An employer 401 (k) match is free money you can raise against the pension, so you don't have to spend your own earned money on it. However, many Americans choose not to take advantage of this, resulting in $ 24 billion in 401 (k) battles that go unannounced each year, according to the Financial Engines. The survey says that the typical employee misses $ 1,336 of free money each year, which could amount to nearly $ 43,000 with compound over 20 years.
4. 29% of Americans have taken early withdrawals from their retirement accounts
When times get tough, nearly 3 in 10 Americans lose their retirement savings, according to Transamerica. Common reasons for taking 401 (k) loans or hardships include paying off debt, unplanned medical expenses, and paying for higher education. These withdrawals can get you through a tough time, but they also hamper the growth of retirement savings, and you can pay penalties on those payouts if they aren't eligible. You are better off putting money for emergencies in a separate emergency fund. Aim to have a lifetime of three to six months.
5. 46% of Americans just guess how much money they need for retirement
. About half of all workers surveyed in Transameric's latest retirement study recognized that they guessed how much they needed to save for retirement. Only 12% had used a pension calculator or spreadsheet to help them get an accurate estimate. Gen Xers and baby boomers estimated that they would need around $ 500,000 for retirement, while thousands estimated they only needed $ 400,000. But both estimates are probably too low. A MetLife study puts the average cost of retirement at $ 738,400, and it is not unreasonable to think you need $ 1 million or more if you live in a high-cost place.
How to save pension savings
If you are one of the 46% guessing how much you need for retirement savings, now is the time to make a real plan. Start by estimating how long you expect to live and look high. One of the 4 65 years currently lives over 90 years of age, according to the Social Security Administration, and 1 out of 10 will live past 95. Draw the age you plan to go to get the estimated length of the pension.  Then consider your annual living costs of retirement and multiply this by the number of years of retirement, adding 3% annually to inflation. A pension calculator will do this math for you. When you have the total estimated pension cost, you deduct any money you expect to receive from pensions, social security or employers 401 (k) matches. You can estimate your social security insurance by creating a My Social Security account. The amount left is how much you need to save on your own. Your calculator should also give you an estimate of how much you need to save per month to reach your goal.
The next step is to open retirement accounts if you do not already have them. Your employer can offer a 401 (k). Start here, especially if your business matches some of your contributions. If your business doesn't offer a 401 (k), open an IRA instead. Traditional IRAs are subject to tax so they reduce your taxable income this year, but you pay tax on the pension distribution. Roth IRA works the opposite way. You pay taxes on initial contributions, but no tax on dividends in pension. Traditional IRAs are more sensible if you think you are in a higher tax bracket today than you would be in retirement, while Roth IRAs make more sense if you think you are in the same or a lower tax bracket today than you would be in retirement. .
Aim to contribute as much as the pension calculator states that you are going each month, or more if you want an extra pillow. If you can't save as much now, save as much as you can and try increasing your contributions by 1% of your salary each year. Avoid taking early withdrawals, even if you have a qualified reason, such as a first-time purchase. Save for these and the standby expenses in a savings account instead.
The above statistics on American pension savings are dire, but you can beat the odds by creating a solid pension plan, diligently saving and taking advantage of any employer 401 (k) matching available.