Be Honest: Are You Really Saving Enough for Retirement?

by Miranda Marquit · 14 comments

calculatorOne of the most important things you can do is to save enough for retirement. Unfortunately, many Americans aren’t saving anything for their future.

According to a survey from, it looks as though about one in three Americans has absolutely nothing in their nest egg. This is a concerning number since it indicates that many people aren’t preparing for their financial future.

Here are the results of the survey, indicating how much money the respondents say they have saved for retirement:

  • Less than $10K—23%
  • $10K to $49K—10%
  • $50K to $99K—8%
  • $100K to $199K—8%
  • $200K to $299K—5%
  • $300K or more—13%
  • I don’t have retirement savings—33%

If you look at those numbers it is clear there is a long way to go for many Americans hoping to retire. On top of that, the problem is compounded for women. According to the survey, women are 27% more likely than men to have no retirement savings. Part of the reason for the shortfall is likely due to the fact that many women are still the caregivers in our society, and may not have their own retirement assets.

While the idea that your partner can take care of you in retirement is a nice one, I know from experience that your partner doesn’t always stick around. At the very least, it makes sense for a stay-at-home partner to ask for spousal contributions to an IRA.

Are You Saving Enough for Retirement?

There is a good chance that you probably aren’t saving enough even if you are saving for retirement right now. It’s tempting to think that the $200 you’re setting aside each month will be enough to fund your golden years, but the reality is that it probably isn’t going to cut it. You will likely need to set aside a lot more for retirement — unless you happen to be a teenager right now.

Take some time to use a retirement calculator to figure out how much you might need in retirement, and then break down how much you need to save each month to increase the chances of reaching your goal.

David’s Note: Using a calculator can actually be very motivating. I get excited every time I use a projection of my savings and see that I’m that much closer to financial independence. You have to be patient, as savings take time to compound but once money starts growing, then you’ll reap the benefits forever.

In the past, research indicated that many Americans don’t even perform a retirement needs assessment. You won’t be able to tell if you’re saving enough for retirement if you don’t even know how much you need. Unless you are quite young, The reality is that saving something like $200 dollars a month is probably not enough to fund your retirement.

After all, compound interest isn’t a miracle. You need to give interest something to work with. This means you need to keep adding capital. Compound interest works better over time, so if you start much younger, you can get away with setting aside a couple hundred dollars a month for retirement.

The truth for those who are in their thirties, though, is that it doesn’t work as well. You aren’t going to meet your goals if you set aside $200 a month. You probably need to set aside at least $500 or $600 a month if you are getting a late start. If you are in your forties, you’ll need even more to “make retirement.”

Don’t expect your investments to “save” you. Plan on a conservative annualized return of between five and seven percent, rather than optimistic projects of between 10 and 12 percent. You’ll have a more realistic idea of what to do, and realize that you probably need to save more.

Once you face reality, and get started with your investment plan, you will be more likely to accomplish your retirement savings goals.

I Now Know I Need to Save, Now What?

After you decide how much you will need for retirement, and after you realistically look at whether or not you are saving enough, it is time to make adjustments to how much you set aside each month.

Open a tax-advantaged retirement account and start putting money into it. It’s even easier if you have an employer-sponsored plan, like a 401(k) or 403(b) at work. That way, you have a chance to have the money automatically taken care of.

These types of accounts are great, especially if you use some sort of automated type of investing. You still need to be careful though. Once you set your account on automatic, it’s easy to forget to invest more later on. As you receive raises, or if your household income grows because of a partner’s new job or your new side business, it’s easy to forget to increase the amount that you are saving.

If you haven’t increased your retirement account contributions to keep pace with your income growth, you probably aren’t saving enough for retirement. You need to re-evaluate your savings each year. If you get a three percent raise, you should also make a three percent (or more) increase in the amount of money you set aside for retirement. At the very least, your retirement contribution growth should mirror your income growth.

Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.

They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.

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{ read the comments below or add one }

  • DNN says:

    I’m vested in the “side hustle millionaire” mindset when it comes to business and $ gUaP $.

  • DNN says:

    While daytime employment is one way of saving for retirement, a side hustle is the gateway to financial freedom. That is, if a person truly desires to be a future “side hustle millionaire.”

  • Latoya @ Femme Frugality says:

    I just recently started using Personal Capital and it’s so helpful to see all of my finances in one area. I really had no idea of just how much lack of progress I was making and seeing it in one place is really jarring. However, I believe once you do this, it will motivate you to make some changes with your retirement savings goals so you won’t continue to be behind.

    • David @ says:

      Tracking your progress can definitely be very motivating. And in a few years, you’ll find that it can be inspiring too when you look back at where you were and where you will be then.

  • khondkar says:

    Put more money on retirement fund is very important if we consider this from investment perspective. For example, Fed rate is currently close to zero(.25%). Since Fed rate is low, return on your retirement fund will be low. The reason behind this is people has more money to invest because of low interest rate. Consequently investment instruments(Stocks, bonds) will be expensive and retirement fund return will go down.

    • David @ says:

      Valuations are definitely up there these days. The only solution is to save more. The good news is that savings is entirely controllable for the majority of us.

      Keep accumulating my friend!

  • Xyz from Financial Path. says:

    I try to always save more than half my income. Not an easy feat for anyone, but possible.

    • David @ says:

      50% or more is awesome. You are well on your way to early retirement if you choose to stop working. And you’ll have loads of freedom way before you ever cross the finish line too!

  • Gwen says:

    These numbers worry me, not so much for me specifically, but what does that mean when I’m in retirement and the people I know don’t have any savings. How is that going to impact society and me individually?

    Something I hadn’t previously considered as part of my retirement savings is my Long Term Care insurance. That is probably because I’m not used to thinking of insurance as a financial asset. If I factor that policy and benefits into my savings and overall plan, I have a sense of relief. When I can no longer work and take care of myself, I might be poor and incapacitated, but I won’t be homeless.

    • David @ says:

      On a social level, you probably won’t know about people’s financial troubles unless you are living among people in the bottom income tier or you personally know a family that’s really struggling.

      Of course, if the problem is widespread enough that it topples the GDP numbers (meaning the decline in baby boomer spending isn’t replaced by increased consumption by the young and increase in population + inflation), then there could be pain for us all.

  • freebird says:

    I haven’t run a formal retirement needs assessment but I think I’m there. I don’t have any pensions but my 401k and IRA accounts total over 50x of my current annual living expenses (excluding income taxes). So as long as my living expenses after retiring don’t rise by more than 50% compared to now, then I should be set. This assumes a 3% safe annual withdrawal rate.

    Those survey results are shocking for the Boomer/Senior 55+ age cohort– are they serious that 28+17.3 = 45.3% of these households have saved less than $10K?? Hopefully they have decent pensions coming because I doubt that Social Security alone will come close to the median 60K+ income for this group.

    • David @ says:

      You’ll be better than okay with 50x. Plus, you are still working so you are only adding to it. Remember that 4% worked with pretty much the worst combination of returns in history so the future is most likely better, meaning you can actually spend more than 4%.

      The numbers do look dire, but I know many people who live on social security and while it’s not the best situation, they do get by just fine.

  • Paul says:

    Great article, makes you think that maybe what my pension will provide may not be enough. Thank you for the help, it was a good read.

    • David @ says:

      Look on the bright side Paul. You have a pension and along with social security act as a spending floor. That means you’ll never run out of money, a scenario everyone else worries so much will happen to them.

      Just keep saving and you’ll be okay!

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