According to the Bureau of Labor Statistics, the average American should have saved about $544,440 for retirement by age 67. Unfortunately, a recent study showed many Americans are falling short of that mark. The report, which surveyed 2,000 adults ages 40 to 79 with at least $25,000 in assets, found that just 14 percent of 60-somethings have more than $500,000 saved. Clearly Americans need to play a game of catch-up. Here’s how to do that.
Move Your Rate
Consider using a savings rate instead of a dollar amount. This way, as CNBC notes, when your salary increases, your savings will as well. If you’re behind on your retirement savings, you need to aim as high as possible, and then increase your savings rate a little each year.
One way to bump your savings rate each year? Avoid lifestyle creep — the tendency to spend more as you earn more. If you get a big raise, don’t immediately buy a fancy new car. Instead, bump up your retirement savings. You’re playing from behind, so keeping expenses low and savings high is key.
Make Sure You Match
If your employer matches 401(k) contributions, make sure you’re maxing out your ability to capture those matching dollars. Let’s say your company offers a 5 percent match. Suddenly, your 10 percent savings rate jumps to 15 percent with no effort from you. It’s free money. Take advantage of it.
Be Wise with Windfalls
Speaking of free money… anytime you get a windfall of cash, it should go directly into your retirement accounts. That means every tax return, every raise, everything! If it’s an unexpected influx of cash, stash it. This will help your retirement savings catch up to where they need to be.