Most workers lackadaisical about their retirement savings
Most working Americans aren't increasing their retirement savings, and some are pulling back on what they're setting aside.
That's according to a new study by New Yorkbased Bankrate.com, which found 46% of workers are saving the same amounts this year as last, while 16% are saving less.
Among 2,016 respondents in phone surveys conducted in July and August, only 29% of Americans have upped their retirement savings. Not surprisingly, those with household incomes of $75,000 and higher are twice as likely to have increased levels as those with household incomes of $30,000 or lower, pollsters found.
Ten percent of the lowest income households didn't save anything for retirement these past two years.
About a quarter of Americans (24%) say they're comfortable with their saving levels, while 23% blame stagnant or decreasing incomes for not upping their contributions. Other reasons include another financial priority (16%), rising household expenses (12%) and “haven't gotten around to it” (12%), which was cited most often by younger Millennials (ages 23 to 29).
Ironically, Millennials — or those born between 1981 to 1996 — in particular have the most to lose by waiting to contribute or delaying a boost in contributions, said Bankrate.com chief financial analyst Greg McBride.
“The power of
compounding (earning interest on interest earned) makes time your greatest ally when saving for retirement, and adds an urgency to contribute now not later, giving your money more time to grow,” McBride said.
In response a LinkedIn inquiry I posted about retirement savings, Marvin Bontrager, an assistant professor of management at Georgia Gwinnett College, said “For me, seeing the visuals of how impactful small, but consistent contribution increases can result in a multiple X factor in growth over time was eye-opening.”
“Early contributions to retirement plans invested for decades can result in a very high payoff,” Bontrager said. “Many people don't realize how much more they will have to save in later years to make up the difference that would have been achieved by time and compounding interest, especially after the first $100,000 saved.” Brandon Long, an employee benefits attorney with McAfee & Taft in Oklahoma City, believes lackadaisical retirement saving is a significant issue among Generation X workers, or those born in the early- to mid-1960s to the early 1980s.
“If you look at the average and median 401(k) balances regionally and nationally, those numbers show that many people will not be ready to retire — not even close,” Long said. “Employees will work longer than they want to or should, which is not good for them or employers.”
Most financial analysts advise workers, from the onsets of their careers, to save 10% to 15% of their incomes for retirement.
Oklahoma City financial adviser Randy L. Thurman recommends people, if possible, max out their retirement savings every year. Annual Internal Revenue Service limits currently are $6,000 for individual retirement accounts; $7,000 if you're 50 and older. Annual 401(k) limits are $19,000; $25,000 if you're 50 and older.
My Oklahoma State University friends Tom and Mary Yeakley of Hurst, Texas, have one just that since they've become empty-nesters.
“I don't have a 401(k) at work,” Tom Yeakley said. “But my company, a natural gas pipeline business, has been able to give across-the-board pay raises, which I've used to max out our IRAs.”
Alan Willoughby, who works in tech support for T-Mobile in Prosper, Texas, said he can't yet afford to max out his 401(k) account.
“Kids are still on the payroll to an extent,” Willoughby, 59, said. “But, I increase contributions every year with my annual raise, and I make sure I put in enough to get every dollar I can on the company match.”