Although social security will provide a certain income for today's workers, these benefits are generally not enough to sustain the elderly by themselves. If you are an average income, you can expect Social Security income to replace about 40% of your previous income. Now that may seem like a decent chunk of money, but in fact, most retirees need more than 70% to 80% of their previous income to maintain a comfortable lifestyle, which explains why it is important for workers to build their own savings.  Unfortunately, however, almost half of Americans are missing in this regard. Only 55% of employees today think they are doing an adequate job of socking away funds for their golden years, according to Wells Fargo Retirement Study in 201[ads1]9. If your savings are not turning around, here are some important steps you can take immediately.
1. Consider Your Expenses and Cut Down
Some people really live paycheck to paycheck and spend every penny they earn to pay for basic necessities. But if you're spending some money on non-necessities, whether it's vacations, restaurant meals, streaming services or rideshare, and your retirement savings aren't as robust as they should be, it's time to rethink your habits and start making changes.
You can start by setting up a budget to actually see where your money usually goes month after month. From there, you can go through the different categories of spending and decide which one you are willing to cut down on. You may want to disconnect the cable or downgrade your cell phone plan. Or maybe you want to make more drastic changes, like downsizing to a smaller home to reduce rent. The choice is yours, but know this: If you really are behind building a nest egg, there is nothing to buy a little coffee every week. Rather, you need to think about major changes to give the IRA or 401 (k) the promise it needs.
2. Think of another source of income
Cutting down too many luxury items is apt to make you miserable, thus putting you at risk of giving up your savings and compromising the future. While it is a good idea to reduce your expenses to degree to increase your nest, another smart effort is to look at getting a new job on top of the most important one.
These days, sidelines are extremely common, and since the money you earn on a non-earmarked living expenses, you can use it all (minus what you owe in taxes) to put an IRA or 401 (k). Best of all, the other gaming job may be something you actually enjoy doing. If you like music, learn an instrument you play. If you are an avid baker, sell homemade items in local markets. And if you love animals, you can sign up for a pet pass or walk dogs at leisure. Over time, your side income can make a nice contribution to your pension plan.
3. Invest your savings wisely
One of the reasons why you may feel that you are behind retirement savings is that you invest your nest egg too conservatively. If you limit yourself to safer investments like bonds, you are able to increase your savings much more slowly than more aggressive investments like stocks allow. But over time, the difference between the two can be huge.
Imagine saving $ 300 a month for retirement over a 35-year period. If you upload on IRA or 401 (k) shares and generate an average annual return of 7% as a result (which is a few percentage points below the stock market average), you will wind up with around $ 498,000. But if you pretty much holding bonds and earning a 3% return during this window will only increase your savings to about $ 218,000.
Takeaway? Don't play it too safe with your savings, especially if you have a longer time window to work with. Investing more aggressively can also help offset the fact that the monthly contributions to your retirement plan may be on the smaller side. Or, to put it another way, sticking to secure investments means you have to put a lot more money in your pocket to build enough wealth to comfortably attract you.
If you are not happy with retirement savings, you should know that the sooner you make positive changes, the less stressful it will be for the future. Also, keep in mind that as retirees approach, you should consider not only the IRA or 401 (k) balance, but also the expected cost of living to make sure the numbers are up. That way, you'll be better equipped to decide if you're actually ready to leave the workforce, or if you need to expand your career and increase your savings even more.