The percentage of employees concerned about not being able to retire on time more than doubled in 2012 to 37 percent, up from 18 percent in 2011, according to a survey by the professional services firm, PwC.
PwC’s 2012 Financial Wellness Survey measured the financial wellbeing and retirement preparedness of 1,700 working Americans and found that 67 percent are saving for retirement, but 40 percent of those savers are socking away less in 2012 than they did last year. And 53 percent of all respondents expect to retire later than they previously planned.
Insufficient savings was the top reason employees expect to delay retirement. Another 2012 survey by the Employee Benefit Research Institute found that 30 percent of workers have less than $1,000 in savings and investments, and 60 percent have a household total of less than $25,000.
“All of the surveys agree, and none of them are surprising,” says Karen Carlson, education director for the nonprofit organization InCharge Education Foundation, which teaches financial literacy. “People are not innately good at saving.”
Uncertainty about how ¬– and how much – to invest and save prevents some people from even starting. And though there’s no one-size-fits-all retirement savings plan, there are some common-sense ways to get on track and make up for lost time.
Track spending against a budget. “This helps to avoid overspending and can identify ways to cut back and funnel more money into savings,” says Greg McBride, senior financial analyst at Bankrate.com.
If an employer offers a matching 401(k) contribution, “Employees should make sure they are taking full advantage of the match – this is free money,” says Jayne Gaffney, vice president of pension administration at Sheakley, a Cincinnati-based HR outsourcing provider. “If there is a cap on the match, employees should be contributing the maximum up to the cap in order to receive the full matching contribution.”
Increase your 401(k) contribution each time you get a raise. Periodically review investments with your plan representative or financial adviser to make sure you’re on track to retire comfortably.
If you switch jobs, you’ll need to decide what to do with the money you saved in your 401(k) accounts: Roll it over to an IRA; roll it into your next employer’s 401(k) plan; leave it behind in your old employer’s plan; or cash it out, which results in penalties, taxes, and lost compound interest over time.
The problem with leaving an account behind is that you may eventually end up with several retirement accounts in several former employers’ plans, making it difficult to track total savings and manage your investments efficiently. You may even lose track of some accounts altogether, warns Spencer Williams, CEO of RSI, a Charlotte, N.C., firm that manages retirement account transfers for corporations. He recommends consolidating savings when transitioning out of jobs so you only have one retirement account to manage.
If you have not saved consistently over time, try a decade of “power saving,” which can transform your retirement account, according to a recent Money magazine article. Saving at least 15 percent of your income, you can build a nest egg equal to 10 times or more of your annual pay. To take the sting out of decreased cash flow, time power-saving decades to coincide with periods when expenses fall, like when a grown child leaves the nest.
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