While taking the kids to school this morning, I heard a shocking statistic on CNN Headline news. More than one-fourth of American workers have less than $1,000 in their retirement savings account. In its most recent survey, the Employee Benefit Research Institute found that 27% of American workers have less than $1,000 in retirement savings. This is up from 20% just a year ago.
If you expand this to $10,000, 43% of American workers have less than $10,000 in retirement savings today – this is up from 39% in 2009. Obviously, the economic recession and the jobless crisis are contributing to this problem. If you can’t find a job, how can you save for retirement? If you can’t pay your mortgage, how can you save for retirement?
This is creating a new problem – Americans have to work longer in order to have the money they need to retire. This is keeping people in the workforce longer, which makes it more difficult to find a job. It is almost like a vicious cycle that needs to be broken.
So people aren’t saving for retirement but they also aren’t projecting what they’ll need to retire with dignity. Oh, and to make matters worse, some companies have stopped 401k matches due to the financial crisis.
In order to achieve the goal of retiring with dignity, Beth McHugh with Fidelity Investments suggests that Americans need to save approximately 6-10 % of their salary. If you follow Dave Ramsey’s plan, he suggests saving 15% of your salary once you reach Baby Step Four.
So some of these Americans may just be temporarily postponing their retirement savings in order to pay down consumer debt but I’d venture to guess that it is a very small percentage.
Although we’re trying to follow Dave Ramsey’s Baby Steps, we are continuing a smallish contribution to 401k savings plans. We are doing this to attempt to avoid the Alternative Minimum Tax trap for 2010. If I’m going to have to pay out $5k in taxes, I’d rather defer some of my pre-tax income to an investment engine. I don’t know if this plan will work but we can only hope.
I’m curious, are you saving for retirement? If not, why? If you are…how much of your annual salary are you setting aside for retirement?
Photo: Alex E. Proimos
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