48% of workers think they don't earn enough to save for retirement — here's how to start, no matter your income

When it comes to retirement planning, start small: "Something is better than nothing."


Almost half of U.S. workers, 48%, say they don't earn enough income to save for retirement, according to a new survey from the Transamerica Center for Retirement Studies. The finding is pretty consistent across generational groups.

On the high end, 55% of Gen Z respondents say they don't earn enough to save for retirement, according to the survey. Even 40% of baby boomers, the age group most confident in their ability to prep for the future, say they don't earn enough money to do so.

Millennials and Gen Xers come in at 49% and 48%, respectively.

It feels pretty daunting that so many people don't feel like they can put away money for their own future, but context is important, says Catherine Collinson, CEO and president of the Transamerica Institute, the parent foundation for the Center for Retirement Studies. Survey responses for the more than 10,000 participants were collected at the end of November 2020, she points out, as Covid infections and deaths were increasing dramatically and many Americans were struggling with business closures, layoffs, and other financial stresses.

While that may have been anxiety inducing, it also made people think very seriously about some difficult subjects, like saving. Overall, credit card debt has fallen during the pandemic, and the personal savings rate spiked each time Americans received a Covid stimulus check.

Half of Americans put the bulk of the third check, which topped out at $1,400 per person, towards paying down debt, according to Census Bureau data, and almost a third of stimulus recipients used most of the money to pad their savings and investment accounts, compared to about a quarter of people in the previous two rounds.

"The pandemic has gotten people's attention," Collinson says. "It's this major tool that has prompted people to look at their finances, and look at them more carefully than they may have been doing so before."

The big question is, Collinson says, how will people who are now thinking about these topics keep that momentum going forward?

How to start saving: Remember, 'something is better than nothing'

Experts recommend you put away 15% of your income for retirement, but that number can feel overwhelming for individuals who haven't begun saving for retirement, or those who stopped saving during the pandemic, and who are starting anew, especially as the delta variant's spread increases fears of more economic uncertainty.

It's important to remember, however, that anything you put away for retirement now — even the smallest additions — helps. Thanks to the power of compounding, little bits can still grow to great amounts. You have other levers that can help you, too: You can often make pre-tax contributions, for example. An employer match can double your money. And there's an extra tax break called the Retirement Savers Credit if you really don't make much.

And starting small can lead to something big later on, says Janet Stanzak, a certified financial planner and founder of Financial Empowerment in Minnesota. "Something is better than nothing," she says. "I applied that to my exercise regimen. And even if I only do 15 minutes, something is better than nothing. It's the same thing with retirement planning: Something is better than nothing."

Starting at just 1% of your paycheck can have big effects decades later. For starters, it gets you into the habit of saving, and makes it easier to up the share of your income that you're putting toward retirement, experts say. It's easier to save 2% of your income if you're already saving 1%.

However, Stanzak's "little by little" motto will really pay off, she says, mostly because of the power of compounding interest, which, over the course of your investment, will help whatever you put away grow into a much bigger sum by the time you get to retirement.

"We can't count on anyone else for retirement," Stanzak says. So it's key to invest in yourself.

Your employer's 401(k) is 'the number one best way'

Once you've decided to dedicate a portion of your savings to retirement, make sure to keep it simple, Stanzak says. There are plenty of products that make retirement savings a no brainer, and like your employer's 401(k) plan. Even if you don't have an employer-sponsored 401(k) plan, though, you have options: There are other types of accounts you can use.

"The number one best way is through your company's 401(k)," Stanzak says. "And if you don't have it, then the next best thing is to set up a monthly automatic contribution to an investment account, some kind of diversified mutual fund. And you know what, if you don't have any direction on that, just take a target date fund, because it immediately diversifies you and gets you started."

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There are many benefits to participating in your company's 401(k) plan, experts say. For starters, you can set up an automatic payroll deduction. Another benefit? Those paycheck deductions are pre-tax, which means putting $50 in your 401(k) is worth more than it would be if it were left in your paycheck and taxed.

The big value of 401(k) plans, however, is the company match. Often times, your employer will match your contributions (up to a certain percentage), dollar for dollar.

Let's say you make $1,000 each paycheck and your company matches your 401(k) contribution up to 5%. If you designate 5% of your paycheck to go toward your company's retirement fund, you would put $50 into the account each paycheck, and your employer would add another $50 onto that. That's free money that you should take full advantage of, Stanzak says.

"If there's extra money, try to get the most bang for the buck," Stanzak says. "Be sure you're getting the match in the 401(k) plan."

Why it's important to start saving for retirement now

One reason workers, particularly those younger than 40, would do well to keep that momentum going is that they plan to live a long time, according to the survey. More than half of respondents said they expected to live to be at least 88 years old. That age expectancy is even higher for millennials and Gen Zers, as 1 in 6 of them plan to live past 99.

In addition to living a long time, many of these folks plan on living very active retirements. Nearly two-thirds, 65%, of everyone surveyed said they dream of traveling in retirement. Half of them said they want to spend time pursuing hobbies.

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While a good share of respondents, 38%, expect to work in retirement, the income from those gigs likely won't be enough to fund your golden years, let alone a retirement full of extracurricular activities, says Stanzak.

Besides, it's smart to give yourself options so that you don't have to stay at a job a lot longer than you want or are able to. "We all know people that look way too old to be working," she says. "And we don't want to be that person."

Remember to think seriously, and realistically, about the future. Today, "it's not unusual for people to live into their 90s and beyond," Stanzak says. "And what are you going to live on? You're not going to work into your 90s. Who's going to provide for you, if you don't provide for yourself?"

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