Retirement Takes Back Seat to Other Expenses as Americans Save
Americans know how much they should be saving for retirement, but the problem is they aren’t listening to their own advice.
Capital One Survey
A recent survey interviewed working adults about their retirement goals and attitudes, and while most people know the ideal contribution rate for successfully saving for retirement, they aren’t keeping up. Capital One ShareBuilder’s Financial Freedom Survey consists of 1,008 phone interviews with Americans age 18 and older. The interviews took place between February 13 and 16 of this year.
Although 93% of workers know they should be contributing to retirement, only 72% are actually doing so. Other costs are interfering with Americans’ ability to save for retirement, most notably saving for their child’s college education, which can be a big drain on finances. According to the survey, financial stress is keeping 3 out of four non-retired Americans up at night. 34% say the thing they lose the most sleep over is supporting children and saving for college, while another 13% say retirement is their top concern.
“Unfortunately, saving for retirement is often put on the back-burner for what seem like more pressing financial priorities, such as paying for college,” said Dan Greenshields, president of Capital One ShareBuilder, Inc, in a recent press release. “Now more than ever, Americans are responsible for ensuring their own financial security during retirement, and the earlier you begin to plan and save, the better.”
Those adults who are contributing some of their annual income towards saving for retirement believe they should be saving an average of 12.1% of their earnings. That’s a far cry from the average 6.4% of income that is actually being contributed, though. Employed men are saving more than employed women, which is typically the case when it comes to retirement. Working men are saving an average of 7.2% of their yearly income, compared to only 5.6% among working women. Women are also understandably more concerned about not having enough saved for retirement.
It’s crucial to increase your contribution amount as early and often as possible to help improve your chances of retiring on time. Otherwise, you could end up working years after your target retirement age, which for most people is 65. 58% of pre-retirees plan to retire at age 65, but nearly the same amount don’t know if they will be able to follow through with that plan.
The President of Capital One ShareBuilder says that a contribution rate of less than 10% is too low, especially as you get older, when the ideal rate is between 15 and 20 percent. This can be difficult to achieve with so many other financial concerns, but prioritizing your spending is key to being successful. You might not be able to reach the your ideal target contribution rate, but nearly every one can cut some superfluous costs from their spending habits and put that extra money towards retirement.
Saving Enough for the Retirement
57% of working Americans aged 18 and older are concerned they won’t be able to save enough money in time for retirement. 61% of women worry about not having enough saved, compared to 52% of men. Women are also much more likely than men to trust their financial advisor or broker the most for financial advice. 33% of women trust their financial advisor the most vs just 23 percent of men who feel the same. Men, on the other hand, are more likely to trust themselves the most for financial advance. 36% of men trust themselves the most vs 25% of women.
“When determining how much to save for retirement, there are a number of questions to ask and options to consider. For starters, it’s important to understand your time horizon, risk tolerance and goals — do you plan to move, would you like to travel, or take up new hobbies? You should also prepare for unexpected and rising costs, like healthcare,” said Greenshields.
Health care is one aspect of retirement that often isn’t even considered until people are in their 50s or 60s. Ideally, people will begin thinking about their retirement health care as soon as they start saving for retirement, because it can often be the largest cost over time. Long term care is especially expensive and without an established plan of how to pay for care, many people will end up dipping into their savings for other parts of retirement and have to figure out how to bridge the gap later.
Long Term Care Insurance is one way to help secure your retirement nest egg and ensure you won’t be forced to deplete all your assets just to receive care. Read more about saving for long term care or to find out how much Long Term Care Insurance would cost you and whether or not it’s a smart financial move for you to make, fill out this form for a no-cost quote comparison of the top rated companies and policies.