It’s never too late to start saving for retirement

A The majority of Americans are woefully unprepared for retirement, but it’s never too late to start taking it seriously.

“About half of Americans are at risk of not being able to maintain their pre-retirement standard of living after they stop working,” Angie Chen, a research economist at Boston College’s Center for Retirement Research, told CNBC.

According to the Federal Reserve’s latest survey of consumer finances for 2019, the median amount Americans saved in retirement accounts was $65,000. Broken down by age brackets, Americans between the ages of 55 and 64 had a median amount of savings of $134,000. Meanwhile, Americans under 35 had just $13,000.

As investors plan for their golden years, many are following the so-called rule of 25 or saving 25 times your projected annual expenses in retirement. This would help achieve a 4% annual withdrawal rate from savings over a 30-year horizon during his retirement years.

“People shouldn’t aim for a number as much as a savings rate,” Chen added. “The best thing people can do is save early and regularly.”

According to the Center for Retirement Research, the required savings rate for people who start saving at age 25 and retire at age 62 was 11% for the lowest tercile for households by income, 15 % for middle-income people and 16% for high-income households. – income earners. An investor can always start saving until later, but rates will only increase to the desired amount once retirement is reached.

For example, a middle-income earner looking to replace 70% of their pre-retirement income will need to save 24% of their income if they start at age 35, or a probably impossible savings rate of 44% if they start at 45. years, according to the Center for Retirement Research.

No one-size-fits-all approach

However, there is no one-size-fits-all retirement savings plan, as everyone has their own unique needs and life goals.

“When it comes to behavior change, well-meaning guidelines are often not very good to follow,” certified financial planner Jude Boudreaux told CNBC. “There are general rules, and then there are individual personal circumstances.”

“My wife and I didn’t meet our retirement savings goals because we were growing my consulting practice,” Boudreaux added.

Additionally, many caution against taking more risks later in life to make up for lost time. It would be a better strategy to delay retirement and/or cut spending to better stretch savings and claim a higher Social Security benefit.

“Don’t take more risks to make up for lost time,” Boudreaux said. “You could end up in a much worse situation.”

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