Here’s how to tell if you are behind on retirement savings

Many people feel like their retirement savings are stagnant. But what exactly does “behind” mean?

More than half (56%) of U.S. working adults say they are behind where they should be when it comes to retirement savings, with some saying they are “significantly behind”, according to new Bank Rates. This includes 37% who said they felt investigation. Almost one-third say he needs more than $1 million to retire comfortably.

Experts show you how to tell if you’re actually behind and what you can do to catch up.

Adults may be feeling behind because they’re not achieving “these goals that you have in your head as rules of thumb or points of comparison” that you set for yourself based on what you read online. said Lazetta Rainey Braxton, Certified Financial Planner. She is the founder and co-CEO of virtual advisory firm 2050 Wealth Partners.

Braxton, a member of the CNBC Financial Advisor Council, helps investors determine how much money they need by taking into account both ongoing living expenses and expenses that may increase in retirement, such as medical expenses. , pointed to the “numerous computational tools” available online. The latter may be important: fidelityThe average retired couple turning 65 this year will likely need about $315,000 in savings to cover their retirement health care costs.

Brokerage firms like Fidelity and T. Rowe offer benchmarks to help you chart your path to retirement. Benchmarks provide milestones and savings targets for various ages.

for example, According to Fidelity’s guideYou should aim to save twice your starting salary by age 35 and 10 times your starting salary by age 67. According to T. RoweYou need to save 1 to 1.5 times your current annual income by the age of 35, and 7 to 13.5 times your annual income by the age of 65.

Based on such measures, it is no wonder that people feel left behind. According to Vanguard, people between the ages of 25 and 34 have an average 401(k) balance of $30,017 and a median of $11,357. America’s Savings Report 2023. Even for the 55-64 age group, the average and median balances are $207,874 and $71,168, respectively.

Christine Benz, Director of Personal Finance and Retirement Planning at Morningstar, told CNBC that when she compares herself to benchmarks, adults who are or are nearing retirement say they need an additional six-figure sum to retire. He said that he might feel stressed if he did.

“But I think it’s better to have specific information than no information,” Benz said of the benchmarks.

A Bankrate survey found that Gen I think we are behind the times.

Ted Rothman, senior industry analyst at Bankrate, said older workers are feeling further behind because they’re getting closer to retirement, even if they haven’t yet, and that these workers are “not saving as much as they thought they would.” “No,” he said.

People’s average lifespans are also increasing, and many workers now need to fund a retirement that could take 30 years. In that case, Rothman said a 4% exit rate is a “safety net.” If people think they need $1 million to $2 million for retirement, as 13% said in the Bankrate survey, a 4% withdrawal rate equates to about $40,000 a year, he said. .

“At first it didn’t seem like it would cost that much, but then you’re like, ‘Oh, wow, I might need more than $40,000 a year to survive,'” Rothman says. “So now you’re feeling behind.”

Margherita Chen, CFP, CEO of Blue Ocean Global Wealth in Gaithersburg, Md., says looking to so many different places for savings guidance can be overwhelming. In many cases, he said, it may only increase anxiety.

Chen, who is also a member of CNBC’s Council of Financial Advisors, says that if your employer’s retirement plan sponsor’s website and multiple other tools show you are underpaid, the next best thing is to adjust your contribution rate. He said he would check.

When people say they are maxing out their retirement plan, they often mean maxing it out in terms of employer suitability, typically between 5% and 6 %, Chen points out.

However, you may be able to contribute more to your 401(k) to meet the annual maximum, she said. Workers can contribute up to $22,500 under the scheme this year. IRS 2023 Limits.People age 50 and older who say they are most stressed about retirement are eligible to contribute an additional $7,500..

Bankrate also found that this age group is the least likely to know how much money they will need by retirement, but those who don’t have as much time left are more likely to start saving for retirement or make savings. Rothman said people should not be discouraged by the

For young workers, early action to start investing and increasing contributions can help them stay on track. According to a study by Bankrate, Gen Z and Millennials report feeling most comfortable saving for retirement.

Rothman emphasized that “time is on your side,” so “every dollar” you save in your 20s and 30s is important. If young people start early and increase their profits by about 10% each year, their money could “quintuple over 35 years,” he said.

“That’s a big difference.”