According to the nonprofit Employee Benefit Research Group, about 1 in 4 American workers do not save enough money for retirement. A research conducted by 401k.org revealed the fact that many Americans with 401(k) contribute between 5 and 7 percent of their tax salaries into the retirement funds. That is very low, as the majority of the people need to replace around 80 percent of their salaries during retirement.
Not enough money saved
Alicia Munnell, director of Boston College’s Center for Retirement Research stated that the majority of the Americans are not saving the amount of money they should be saving. She stated that it is very important for people to make certain financial changes, in order to be able to live the life they would like to live when they retire. In case they do not save enough, they will not be able to maintain their current standard of living. This means that people with high income will be disappointed, whereas the ones with low income will have to sacrifice either food or medicine in order to be able to survive.
Mrs. Munnell also stated that people, who do not have other retirement plan besides the Social Security one, are the most vulnerable. The problem is that many people have only the Social Security plan, and as a result, they risk becoming very poor. According to other experts, the U.S government should make some changes to the retirement income system. It is the government which should initiate these changes, but so far, no one has come with the initiative. The experts have stated that a new tire of retirement savings should be introduced, besides the 401(k) and the Social Security one.
The financial advisors have stated that in order for people to be able to have a bigger retirement fund, they need to save from a very early time. Another solution would be to work for a longer period of time, up until they are 70. That is, if they can do it, of course. In case they can work up to that age, they will receive a higher Social Security, and they will manage to increase the amount of the 401(k). The experts have also stated that many people do not save as much as they should. For example, if they save 4 percent, since they are 35, and work until they are 67, they need to save 18 percent of the income.
Other useful methods
Stock market is not an ideal option either, because in the last market, it has returned almost zero income. In 1998, things were much better, but since then, lots of things have changed. There are many people who have invested in stock market, in the hope that they will be able to retire with that money, but in ten years haven’t made a single dollar in profit.
It seems that there is another way in which people can save money. They can live in a smaller house, because they usually pay big taxes for their homes.