15% of Americans Need a Serious Retirement Wake-Up Call

We're told repeatedly about the importance of saving independently for retirement, especially given Social Security's shaky future, and the fact that those benefits were never designed to sustain seniors by themselves in the first place. Yet millions of Americans are presently without a nest egg and, thus, they're running the risk that they'll either never manage to retire or will wind up cash-strapped once their careers come to a close.

Specifically, 15% of Americans have no retirement savings at all, according to Northwestern Mutual's 2019 Planning & Progress Study. Now, on the one hand, that's a marked improvement from the 21% who had no money in their nest eggs as of last year. On the other hand, it speaks to a serious need to ramp up on the savings front -- or risk struggling financially for years to come.

IMAGE SOURCE: GETTY IMAGES.

Social Security alone won't cut it

Many workers neglect their retirement savings because they're convinced they'll fall back on Social Security instead. But those benefits will only replace about 40% of the average earner's pre-retirement income, and most people need roughly double that sum to live comfortably during their golden years.

When you take a step back and examine your expenses, you'll understand why. Most of the bills you encounter during your working years won't go away in retirement. You'll still need a roof over your head, a means of transportation, and food. You'll also remain on the hook for things like heat, electricity, water, and phone service. And let's not forget healthcare -- the one expense that tends to go up, not down, in retirement. Therefore, planning to live on less than half of your previous income doesn't make a lot of sense, even if you are willing to cut back on spending dramatically.

A better bet? Build some savings of your own. You don't necessarily need to aim for a $1 million nest egg, but you should aim to have a decent chunk of cash set aside for the future. The good news, however, is that if you're still relatively young, and therefore have several decades of work ahead of you, you can amass a decent amount of savings by making modest contributions to an IRA or 401(k) between now and when you're ready (or forced) to call it quits.

Check out the following table for an idea of how much savings you might accumulate over a 30-year period, assuming a 7% return on investment, which is several percentage points below the stock market's average:

Monthly Savings Contribution

Total Accumulated Over 30 Years at an Average Annual 7% Return

$200

$227,000

$300

$340,000

$400

$453,000

$500

$567,000

$600

$680,000

TABLE AND CALCULATIONS BY AUTHOR.

Obviously, the closer you are to retirement, the more money you'll need to sock away each month for a shot at financial security down the line. But even if you're a mere 10 years away from that milestone, maxing out an IRA at $7,000 a year would leave you with $97,000, assuming that same 7% return. And while that's not a large sum of money over the course of what could conceivably be a 30-year retirement, it's certainly better than nothing.

Finally, if you've truly reached the tail end of your career, consider postponing retirement by a year or two. Doing so might enable you to accumulate a small amount of savings, but just as importantly, you'll have the option to delay your Social Security benefits, thereby boosting them in the process. And while those benefits shouldn't take the place of retirement savings, if that's the situation you've landed in, you might as well get as much money from them as you can.

The $16,728 Social Security bonus most retirees completely overlook

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