More than 1 in 3 Americans have "no idea" how much money they need to put away for retirement, according to a recent survey, and about 1 in 5 haven't started saving yet. That's according to researchers at personal finance website FinanceBuzz, who polled a national sample of 1,000 U.S. adults about what's in their reserve funds and how they can earn more.
Experts generally say you need an annual retirement income of about 75% of your pre-retirement income. According to Grow's calculations, a 25-year-old currently earning $50,000 a year could have a goal of $1.6 million when they retired at age 67, for example, to meet those needs.
Accumulating that much money can be daunting. When asked what's stopping them from putting more away for the future, over a quarter of survey respondents said "not earning enough to save" and cited expenses including health care.
Many millennial, Gen X, and baby boomer households are often juggling more immediate priorities while trying to plan for the future, says Charles H. Thomas III, a certified financial planner and founder of Intrepid Eagle Finance. "Millennials face a challenge of prioritizing resources — marriage and children, combined homeownership," he says. "Gen X and boomers can see retirement on the horizon … but many households are facing dual commitments of caring for their elders while also supporting children in college or young adulthood."
Income and retirement inequality is a problem that could be addressed by Congress, according to the National Institute of Retirement Security. Fixes could include protecting employer pensions, increasing access to employer-based savings plans for low earners, and expanding Social Security benefits.
But you don't need to wait for the government's help to improve your own financial outlook. Taking some basic steps now can help you save, no matter your net worth or the income bracket you fall in. "Stop waiting for someone else to work on this challenge," says Thomas. "Get started, even if it's saving 1% in your 401(k), and build on that success over time."
Experts suggest saving between 10% and 20% of your monthly income, or however much you can, in a workplace retirement account. Close to a majority of savers in the FinanceBuzz poll are on track and investing more than 10% of their income for retirement.
"Utilize your tax-advantaged retirement savings options," Bankrate chief analyst Greg McBride previously told Grow. "If you have an employer-sponsored plan, you can contribute by a payroll deduction, and your employer oftentimes will match some of the funds that you're putting in, giving you free money."
Even if you don't have an employer-sponsored plan, he adds, you may still be able to contribute to an IRA or other tax-advantaged retirement plan to grow your savings.
"Early investing can prevent the need to aggressively catch up. By enrolling in a [retirement plan] immediately when eligible, investors can dramatically increase their probability of success," he says.
Video by Ian Wolsten
Another "simple strategy for millennials and Gen X is to take advantage of a feature offered in many retirement plans called auto-escalation, [which] automatically increases an investor's retirement plan contribution by a minimum of 1% per year," he says. "It is a very easy way to … increase retirement savings without making a noticeable impact on cash flow."
Savers who are getting closer to retirement could focus on increasing income and cutting costs, experts suggest. That could mean picking up a side job, eliminating less necessary expenses, or moving somewhere less expensive.
More from Grow:
- I want to join the FIRE movement, become a supersaver, and retire early: How I plan to start
- 1 in 3 workers with a 401(k) could boost retirement savings with this simple change
- Money doesn't make you middle class — here's what does, according to an anthropologist, sociologist, and philosopher