5 Signs You’re Not Saving Enough to Retire

Ezra Summers

June 28, 2023

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5 Signs You’re Not Saving Enough to Retire

Planning for retirement is no small feat, and knowing if you’re saving enough can be a big question mark. It’s all about preparing for a future that’s hard to predict. But there are common signs to look out for that suggest you might need to ramp up your retirement savings.

Table of Content

What Does Saving for Retirement Mean?
Common Ways to Build Your Retirement Savings
How Can You Tell if You’re Not Saving Enough?
Tips for Estimating Your Retirement Income
Ways to Boost Your Retirement Income
Useful Retirement Apps and Websites

What Does Saving for Retirement Mean?

Saving for retirement essentially means setting money aside during your working years to cover your living expenses when you stop working. You’re planning for a time when your steady paycheck might no longer be coming in, and you’ll need to rely on your savings and other income sources, such as Social Security, pensions, or part-time work.

Common Ways to Build Your Retirement Savings

Method	Description	Important Details
Employer-Sponsored Retirement Plans	Retirement plans offered by employers, such as 401(k), 403(b), or Thrift Savings Plan (TSP). Employees can contribute a portion of their salary, often with employer matching contributions.	– Take advantage of employer matching contributions. – Contributions are tax-deferred until withdrawal. – Contribution limits apply. – Early withdrawals before age 59 ½ may incur a penalty. – Consider investment options and fees within the plan.
Individual Retirement Accounts	Personal retirement accounts, such as Traditional IRA or Roth IRA, available to individuals. Contributions can be made directly by the individual, subject to annual contribution limits.	– Traditional IRA: Contributions may be tax-deductible, taxed upon withdrawal. – Roth IRA: Contributions are not tax-deductible, tax-free qualified withdrawals. – Contribution limits apply. – Early withdrawals before age 59 ½ may incur a penalty. – Consider income limits and tax implications.
Automatic Payroll Deductions	Automatic contributions made directly from your paycheck to retirement savings accounts. It ensures regular and consistent contributions without the need for manual transfers.	– Set up automatic contributions to your employer-sponsored retirement plan or individual retirement account. – Determine an appropriate contribution percentage. – Monitor and adjust contributions as necessary.
Investment Portfolios	Invest in diversified portfolios of stocks, bonds, mutual funds, or exchange-traded funds (ETFs) to grow your retirement savings over time.	– Determine your risk tolerance and investment goals. – Consider diversification and asset allocation. – Regularly review and rebalance your portfolio. – Understand associated fees and expenses.
Increase Savings Rate	Gradually increase the percentage of your income allocated towards retirement savings.	– Create a budget to identify areas where you can reduce expenses. – Allocate additional funds towards retirement savings each month or year. – Aim to save a higher percentage of your income over time.
Delaying Social Security Benefits	Opt to delay claiming Social Security benefits beyond the eligible age (typically 62) to increase your monthly benefit amount.	– Consider your financial situation and retirement goals. – Understand the impact of delayed benefits on your retirement income. – Consult Social Security guidelines and rules.
Seek Professional Financial Advice	Consult with a financial advisor or planner who can provide personalized guidance and help create a comprehensive retirement savings strategy.	– Work with a reputable and qualified financial professional. – Share your financial goals, risk tolerance, and retirement timeline. – Discuss investment options, tax implications, and long-term planning.

How Can You Tell if You’re Not Saving Enough?

Here are a few red flags:

You’re not maxing out your employer match: If your employer offers matching 401(k) contributions and you’re not contributing enough to get the full match, you’re leaving free money on the table.
You’re not saving a substantial portion of your income: A common rule of thumb is to save 15% of your pre-tax income for retirement. You might need to up your savings game if you’re saving significantly less.
You’re living paycheck to paycheck: If you find it hard to meet regular expenses and have little to nothing left over at the end of each month, it can be a sign you’re not saving enough.
You have high levels of debt: High-interest debt can keep you from setting aside money for retirement. If a large portion of your income goes towards paying off debt, you might struggle to save adequately for retirement.
You don’t know how much you need: If you have never calculated your retirement savings goal, it may be hard to know if you’re saving enough.

Tips for Estimating Your Retirement Income

To estimate your retirement income, consider your expected Social Security benefits, any pensions or annuities you might have, and income from retirement savings.

Online retirement calculators can help estimate how much you’ll need based on your current age, income, savings, and expected retirement age.

Here are a few reputable websites that offer retirement calculators:

Fidelity Retirement Score: Fidelity’s retirement calculator helps you estimate your retirement savings goals and provides insights into your progress.
Vanguard Retirement Nest Egg Calculator: Vanguard offers a retirement calculator that helps estimate your retirement savings needs and suggests strategies to meet your goals.
Charles Schwab Retirement Calculator: Schwab provides a retirement calculator to help assess your retirement savings plan and determine if you’re on track to meet your goals.
T. Rowe Price Retirement Income Calculator: T. Rowe Price’s calculator helps estimate how much annual income your retirement savings may generate and assess if you’re on track for a comfortable retirement.
AARP Retirement Calculator: AARP offers a comprehensive retirement calculator that factors various aspects of your financial situation to estimate your retirement income needs.

Ways to Boost Your Retirement Income

To boost your retirement savings, consider the following strategies:

Increase contributions: If you can, increase your contributions to your 401(k) or IRA. Even a slight increase can make a big difference over time, thanks to compounding interest.
Catch-up contributions: If you’re over 50, you can make additional “catch-up” contributions to your 401(k) or IRA beyond the standard limit.
Reduce expenses and pay off high-interest debt: Cutting back on discretionary expenses can free up more money for retirement savings. Similarly, paying off high-interest debt can reduce your monthly obligations and allow you to save more.
Consider working longer: Delaying retirement or working part-time can provide additional income and allow your retirement savings more time to grow.
Use apps and websites: Investment platforms can help you save for retirement easily by automating your savings, analyzing your investment portfolio, and creating a comprehensive retirement plan tailored to your needs.

Useful Retirement Apps and Websites

Betterment is an online investment platform that offers automated investing and personalized retirement planning services. It provides tools and guidance to help you set retirement goals, choose appropriate investment portfolios, and automate contributions.

Personal Capital is a comprehensive financial management platform that includes retirement planning features. It allows you to track your retirement accounts, analyze your portfolio, and offers retirement calculators to help you plan for your future.

Wealthfront is an automated investment service that offers a retirement planning feature called Path. It helps you set retirement goals, project your future savings, and provides personalized advice to optimize your retirement savings.

Mint is a popular personal finance app that provides budgeting and expense-tracking tools. It can help you monitor your spending, set savings goals, and track your progress toward retirement by syncing it with your retirement accounts.

Vanguard is an investment management company that offers a user-friendly website and mobile app. It provides retirement planning tools, educational resources, and a wide range of low-cost investment options, including target-date retirement funds.

Acorns is a micro-investing app that rounds up your everyday purchases and invests the spare change into diversified portfolios. While not explicitly focused on retirement, Acorns can be a valuable tool to start saving and investing, which can contribute to your retirement savings over time.