Are you on track to save enough money for your retirement? If so, congratulations! According to a recent survey, you are in better shape than 71% of your fellow Americans.
The study, commissioned by the credit bureau Experian, shows the sobering situation that many Americans expect to face in retirement. 71% of those surveyed report being behind on their retirement savings. In addition, 54% of respondents believe that they will never completely pay off their debts, and 46% have a lower amount of savings today compared to their expectations for today from five years ago.
These results are consistent with other surveys that show Americans struggling to fund their retirement properly. A recent survey from the Federal Reserve found that 22% of people from ages 45 to 59 claimed that they had no pension or retirement savings at all, and 46% of the adult respondents could not cover a $400 emergency expense with their savings. Too many Americans are living paycheck to paycheck, and in that scenario, retirement savings tend to fall by the wayside.
When asked to identify the biggest obstacle to increasing savings, insufficient income was the most frequently chosen option (35%). Only 13% of respondents blamed spending on unnecessary things as the largest obstacle.
However, it is possible that people are underestimating their spending, since the survey found that only 58% of respondents use a budget for their personal and household spending. Of those who do use a budget, the majority (69%) do so in order to control their spending. For those who do not use a budget, 38% believe that budgets are unnecessary, 23% find them ineffective, and 16% do not know how to use them.
These numbers drive home an important finding of the survey: financial education is a key factor to debt reduction and savings, and therefore accumulating the necessary savings to devote toward retirement. If you don't believe budgets are useful or cannot use them effectively, you are probably more likely to overspend relative to your income level.
With too little income and too much spending, debt naturally follows. A surprising 82% of respondents are carrying some form of debt, with just less than half holding credit card debt. Lack of cash flow was reported by 36% of respondents as the primary reason for their credit card debt, and overspending was the next highest cause at 27% — but given that 42% of respondents do not use a budget, these numbers seem surprisingly low.
Even with all of the gloomy responses above, we Americans remain optimistic. According to the survey, 64% of respondents were either very confident or somewhat confident that they would be able to achieve their financial goals. That confidence may be a bit soft, as almost twice as many people were "somewhat confident" as compared to "very confident," but optimism and confidence are positives — as long as they are followed up with action.
Action is the key. There is no magic bullet to achieve sufficient retirement savings. If you are planning on lottery winnings or other miracles to fund your retirement, redirect your focus toward useful pursuits like maxing out your company 401(k) contributions. Do not let a lack of understanding or comfort with investing deter you from building the retirement resources that you need.
Success requires making retirement saving a priority and scrutinizing both sides of the financial equation: income and spending. Review your spending habits and incorporate regular retirement savings and investment as part of your budget now — because it's too late when retirement is just around the corner.
Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle.