YOUNGSTOWN, Ohio (WKBN) – In order to enjoy National Retirement Week, you need to be saving while you’re working.
One-third of Americans have no retirement savings. If you’re one of those people who are not as prepared for retirement as you should be, one local financial expert has a few tips that could help you stay on track throughout your career.
Being a financial consultant, Jason Laux from Synergy Group knows that many people fall short when it comes to saving for retirement, even if they have access to an employer retirement savings plan.
He says one in five people do not save enough to get the full match from their employer. Things like student loan debt and fear of the markets keep people from putting enough money aside for retirement.
Laux tells his clients to follow the guidelines provided by Fidelity, because they provide targets for workers to hit as they get older and closer to retirement.
The first milestone is when you hit age 30. You should have your annual salary saved in a retirement account, like a 401(k). By age 35, you should double your annual salary saved. The milestones then keep building on each other.
You should have eight times your salary by age 60. Then, your ultimate goal is 10 times your annual salary by age 67.
Reaching these goals may seem daunting, but what’s important to remember is to start early. Laux has three tips — take free money, build up savings and cut back.
Getting started in your company’s 401(k) plan can help you “take free money.” He recommends putting away 10-15 percent of your salary into a 401(k) or IRA.
If that’s not possible, make sure you are at least putting in enough to get the company match. If you don’t, it’s like you’re throwing away free money.
Once you start saving, you can “build up savings” by working toward that 15 percent by increasing your savings by 1 percent every year. Some retirement savings plans will allow you to automate increased contributions, so you don’t even have to think about it.
Another great idea is to increase your contributions with every raise you get. This way, you start saving money before you get used to it and start spending it.
To “cut back,” start simple by focusing on one way to save money. If you start to pack your lunch three times a week, you can save more than $9,000 in seven years, if you average a 5 percent return. Or, you can try cutting back on coffee, drinks and movies.
But, what if you think it’s too late because you are close to retirement? Or what if you haven’t met your savings goals?
Laux has three more tips to help people boost their savings — play catch-up, reduce fees and wipe out debt.
Retirement accounts are designed to help older workers “play catch-up,” by allowing additional catch-up contributions for workers ages 50 and older. They can save an additional $6,000 in a 401(k) and $1,000 in an IRA for 2017.
Younger workers are capped at saving $18,000 per year in their 401(k) and $5,500 in their IRAs for 2017. So, if you’re serious about retiring, maxing out those savings is the way to go.
To help “reduce fees,” don’t spend more than you have to on them. 401(k) fees are a small percentage that is taken off the top of the account’s balance each year.
The average 401(k) fee is about 1 percent, which may not sound like a lot, but the typical American worker will spend more than $138,000 in 401(k) fees over his or her lifetime. So, you want to make sure to research the fees you’re paying and look for options that have smaller fees.
Laux’s final piece of advice is to “wipe out debt.” The earlier you can pay it off, the better, because once you’re in retirement, you will be on a fixed income and any debt you still have will drain your budget.
Prioritize paying off your high interest rate items first, like credit cards. Then, move on to lower interest rate items, like your mortgage or car loan.
If you still have concerns about your financial situation, visit Synergy Group’s website for more information.