According to a recent study by the Employee Benefit Research Institute*, 36 percent of workers have only 1,000 dollars saved for retirement. That amounts to one third of the workforce who are completely unprepared for retirement!
The good news is that 18 percent of workers report feeling “very confident” about retirement, and this number has risen from 13 percent in 2013. Obviously, economic conditions are improving, and more American workers are beginning to save for the future.
Clearly, there is still a large number of people who need to think more carefully about their retirement. So what can they learn from the “very confident” 18 percent? According to the study, those who are adequately prepared for retirement have a few important things in common:
They know what they need. It’s difficult to come up with an adequate retirement plan without attaching a specific number to your savings goal. Good savers know this. In fact, about 44 percent of workers have used a retirement calculator to settle on a target savings amount.
They have a higher income, and they’re good with money. It goes without saying that those with a higher income have an easier time setting aside part of it for retirement. Workers with an annual income above $75,000 are more likely to report feeling confident about retirement.
But that’s not the end of the story. Having some money is only half the battle; knowing how to use it is important, too. Of those who reported saving only $1,000 dollars or less, 68 percent also reported incomes below $35,000. That means 32 percent of workers with virtually no retirement savings actually earn more than $35,000 per year. In many cases, a careful examination of the household budget could free up some extra cash which could go into savings.
They have a retirement account. Of the households who report having a retirement account, 90 percent of them actually contribute to it. On the other hand, only 20 percent of workers without a designated retirement account have saved money for their later years. Obviously, setting aside a separate account for retirement is much more motivating than simply putting money in a regular savings account.
*http://www.ebri.org/surveys/rcs/2014/
