Many younger Americans say the Covid pandemic set them back by at least a few years from reaching long-term financial goals. Retirement, in particular, has people worried they haven't saved enough.
Nearly half, 46%, of the 2,050 people polled in a new MagnifyMoney survey think their current financial situation will force them to retire in debt. The survey included workers of all generations, from ages 18 to 75, not just those approaching retirement.
Those worried about their financial prospects for retirement offered five main reasons why. (Respondents could pick multiple answers.)
Some of those worries may be more likely than others.
Surprise health care expenses can rock retirement plans. Six in 10 Americans have debt from medical bills, according to a LendingTree survey. Data from the Employee Benefit Research Institute found that 46% of retirees called it quits earlier than expected, often for health reasons.
When it comes to Social Security, the Social Security Administration projects that if no legislative action is taken, it will only be able to pay beneficiaries in full through 2037, which is a full decade before the oldest millennials turn 65. But advisors expect the benefit will continue to pay Americans.
"Don't take into account whether the government is going to run out of money because it can't run out of money," Carolyn McClanahan, M.D., CFP, and founder of Life Planning Partners, told Grow. The Social Security retirement benefit "will be there for you," she said.
If you want to feel more confident in your retirement prospects, the first step is to assess your goal. Experts generally say for a secure retirement, you generally need an annual retirement income of about 75% of your pre-retirement income. Check out Grow's retirement calculator for a goal tailored to you.
Aim to stash 10% to 20% of your monthly income in a 401(k) or another workplace retirement account. Even without an employer-sponsored plan, you could still contribute to an IRA or other tax-advantaged retirement plan.
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"Get in the habit of saving income for retirement early," says Bankrate chief analyst Greg McBride. "Starting that habit when you're young and your earnings are low is something that stays with you and enables you to save at a healthy rate as your income grows in future years."
He adds: "Starting early, saving consistently, and investing for the long-term will help you build a nest egg that won't be as dependent on future Social Security benefits, uncertain as they are."
Consider automating your contributions to streamline the process. Take advantage of windfalls, such as a raise at work, to scale up contributions over time.
"Many employers have an auto-escalation feature that will increase the amount of your pay going into the workplace retirement plan by 1 percentage point at the beginning of each year, say from 5% to 6% this year and to 7% next year," McBride adds.
Aggressive moves like maxing out your 401(k) can be a great way to secure your financial future, but it's OK if these sorts of strategies don't work for you. Focus on saving what you can, even small contributions can make a difference with time to compound interest.
Even contributing just 1% "can make a big difference in your balance when you retire," Jessica Macdonald, vice president of Thought Leadership at Fidelity Investments, previously told Grow.
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