Quick, how much do you have saved for retirement? If you're aiming for your ideal body shape, hooray for hips, hips!
Nearly 1 in 4 Americans have no idea how much money they have in their retirement accounts, according to a new report from the TIAA Institute.
This discovery is surprising. Because knowing what you currently have in your retirement accounts will directly affect everything else, including how much you save, what you invest in, when you can retire, and how you spend your golden years. Because it affects you.
According to a TIAA study, 3 in 10 Black Americans and nearly 4 in 10 Latinos who haven't yet retired don't know where their savings are.
“People know that retirement is important, but they hardly pay enough attention,” Surya Koluri, director of the TIAA Institute, told Yahoo Finance. “Maybe they think the future is too far away to worry about. Maybe they're too distracted by more urgent day-to-day events at work or home. Maybe they think they have enough savings to match their employer's contribution, and that's enough. ”
read more: Planning for Retirement: A Step-by-Step Guide
Or maybe you don't know how many years from now. He added that a lack of longevity literacy to know how long one is likely to live could lead to people not paying attention to how much they are saving.
Nearly two-thirds of Americans have at least some money invested in retirement accounts, such as 401(k)s, traditional individual retirement accounts (IRAs), Roth IRAs, and pensions, but are not yet retired. Less than half of those who are not are very or “somewhat” confident that they will retire as planned, according to the TIAA report. 15% have no plans to retire at all. The study is based on a nationally representative sample of 1,684 adults ranging from age 22 to age 75.
So if you don't know how much money you have saved, how can you be sure you can retire on time and live happily?
Increase to savings of 15% of annual income
Even if you are many years away from retirement, understanding your financial position will help you determine what percentage of your paycheck you should take away right away and increase your savings rate. It will help you calculate whether.
Saving 15% of your annual income (including employer contributions) is appropriate for most people, says Roger Young, a certified financial planner and senior financial planner at T. Rowe Price in Baltimore. He told Yahoo Finance that his savings level is reasonable. He added that some people might start saving 6% at age 25 and increase their savings by 1 percentage point each year, reaching 15% in their 30s.
Knowing what you've saved to date will determine your options for how to invest your retirement money now. For example, depending on your age and risk tolerance, you may want to increase the percentage of stocks in your account for higher returns over the long term.
The size of your balance will also affect how long you need to continue working full-time or whether you want to continue working in some capacity after leaving your original employer.
read more: What is the retirement age for Social Security, 401(k), and IRA withdrawals?
Account balance is “low”
According to the TIAA study, even among people who can estimate their savings, the imbalance in account balances is low, with half having savings of less than $250,000. Also troubling is that 1 in 8 American girlfriends say they don't know how to fund their retirement.
A story about a crying old man. “Many pre-retirees and retirees are worried that their retirement savings will disappear,” said Katherine Collinson, CEO and president of the Transamerica Institute and the nonprofit Transamerica Retirement Research Center. “And given the low savings rates, a lot of people are certainly at risk for that.” Yahoo Finance.
Collinson said most people don't have a firm grasp of their financial situation. According to his recent TCRS report, fewer than one in four people have a retirement financial strategy in the form of a written plan.
“Many people take an ostrich-like approach, which can lead to unwanted surprises and even bigger challenges down the road,” she said.
So how much should you save? In general, people should aim to save 10 times their pre-retirement income by age 67, according to Fidelity. For example, a person with a salary of $100,000 needs to have $1 million saved by the time they retire. To elaborate on this, Fidelity recommends that you have the equivalent of one year's salary saved by age 30. By the age of 40, your income will triple. By age 50, your income will increase 6 times, and by age 60, your income will increase 8 times.
“The bottom line is people aren't paying attention. That's a big reason why our country is facing a retirement crisis,” Corli said.
It's incomprehensible. It's not that people don't look at their retirement account statements. Most people I know are like that.
“People aren't aware of their retirement savings because they don't understand what retirement savings means,” said John, adjunct professor of advanced planning and co-director of the American College Retirement Income Center. Steve Parrish told Yahoo Finance.
“They look at the numbers, but they don't keep it because it doesn't tell them anything. The value of a 401(k) statement changes every day, so why bother? It doesn't answer the question of how old are they available?'' How much income can they earn in retirement? ”
Check regularly and use all available data
The federal government has sought to address this general lack of understanding. The Social Security benefit statement was recently revamped to show the estimated income she would receive by age 70 if a participant applied for benefits at age 62, age 63, etc.
Employers offering 401(k) and other defined contribution retirement accounts are now required by law to include two charts converting participants' account balances into lifetime income equivalents. One will be shown as a single pension (participant only) and the other will be shown as an annuity. Qualified joint and survivor pensions (for members and spouses) – at least once a year.
“These statements are intended to alert Americans to how much Social Security and employer plans are likely to pay them in retirement income,” Parrish said.
The goal is not to dwell on the daily ups and downs of your account. Saving for retirement is a long-term game. The key is to be informed about your situation so you can make adjustments as needed.
“These statements are intended to alert Americans to how much Social Security and employer plans are likely to pay them in retirement income,” Parrish said. “People see it on a regular basis, or at least once a year. If you're falling behind, you can take action and catch up.”
Kelly Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 of her books, including “The World's Best.''Taking Control Even Over 50: How to Succeed in the New World of Work.” and “You’re never too old to get rich.” Follow her on X @Kellyhannon.
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