Employees are generally aware that they will need anywhere from 70% to 80% of their final income on an annual basis to live comfortably in retirement. The logic is that since most living expenses remain the same in retirement, and some go up themselves (such as health and leisure), workers must replace most of their previous paycheck. But the Insured Retirement Institute's data tells us that a large proportion of older workers are not near the target, and 45% of baby boomers have zero retirement savings.
Of course, savings are just a potential source of income in retirement. Other options include social security, part-time income, or retirement benefits from a former employer. However, the latter is not something seniors can trust.
Only 23% of older workers aged 56-61
For an average earnings, Social Security will replace about 40% of its previous income. And while it's not that scary when there are other sources of income at stake, they see without a savings or retirement a rather bleak picture.
If you crawl against retirement without money for your name, it is imperative that you start saving immediately. Otherwise, it is likely that you are going to throw up cashmere and misery at some point in your life when you deserve it better.
Getting lost in time
Whether you have neglected your savings due to poor money management or because you mistakenly believe you can get past social security, consider this your wake up call to start doing better . First, you should examine your budget or create one if you don't have one yet, and identify ways to cut back on spending significantly to free up money to save. This can mean reducing your living space, giving up a car that you can technically live without or limiting your leisure and meal meals.
At the same time, you can look at getting a new job on top of your primary one to drum up extra funds for the IRA or 401 (k). Of the millions of Americans who are said to stay in a side cast, 14% make it the explicit purpose of being able to build a nest egg.
How much should you have to save every year? Ideally, as much as possible. If you are 50 or older and have access to a 401 (k) plan through work, you can sit up to $ 25,000 annually. If you don't have a 401 (k), your next best option is to maximize an IRA of $ 7,000 this year, but supplement it with savings by putting money into a non-retirement account (such as a traditional broker account).  From there, it is crucial that you invest the savings for increased growth between now and retirement. If you fill up stocks (which you should feel comfortable with as long as you have a 10-year savings window or longer), there is a good chance that your investments will generate an average annual 7% return, which is actually slightly below market average. Therefore, if you are able to maximize a 401 (k) of $ 25,000 a year over the next 10 years, you will come up with $ 345,000, assuming an average annual 7% return.
Of course, you go from saving nothing to maximizing a 401 (k) is a big ask, so let's use a more realistic number – $ 800 a month. Save it for 10 years and you will sit at about $ 133,000 for retirement, assuming 7% average annual return. There is not a lot of money, but if you save so much and also go on board with part-time as a senior, you can get by.
One last thing: If you are already in your 50's without much savings, it pays to think about delaying retirement as long as you can. Doing so will give you a few extra years to save while leaving your existing savings untouched for longer. Deferred retirement can also allow you to keep on demanding social security beyond your full retirement age, which means increasing your benefits in the process. And if you are looking to go into retirement without much savings, it is certainly a certain idea to increase another income stream.