by Broderick Perkins
(9/22/2011) ERATE Exclusive - Chances are, you aren't saving enough for retirement.
More than half the nation's workers, 56 percent, report that the total value of their household's savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.
Nearly one third, 29 percent, say they have less than $1,000 socked away, according to the "Retirement Confidence Survey (RCS)" released earlier this year by the Employee Benefit Research Institute.
It's time to knuckle down.
First get a ballpark etimate online or in the comfort of your own home.
The estimate is an easy-to-use, two-page worksheet that helps you quickly identify approximately how much you need to save to fund a comfortable retirement.
The worksheet considers projected Social Security benefits, earnings assumptions on savings, and turns them into results you can understand.
What you'll probably find, like the 56 percent of workers who only have $25,000 socked away, is that you need to save more, much more.
Save at work, save more
Your 401(k) plan at work, if available, is a great place to start. You pay into the plan and many employers match a portion of what you pay.
Consumer Reports' Money Advisor sat down with Maria Bruno, an analyst at Vanguard's Investment Counseling and Research group and found that employees were only saving about 6 percent with a 3 percent employer match, for a 9 percent median savings rate.
Vanguard says, in these tough economic times, your savings rate, along with your employer's contribution should be much higher, 12 to 15 percent.
Maybe you really can't squeeze out 15 percent or even 12 percent, but the experts have upped the ante on what you should be saving, because most people don't save enough.
You probably also didn't start saving soon enough.
In a hypothetical comparison, Consumer Reports' compared a 16-year-old and a 30-year-old, both opening a Roth Individual Retirement Account (IRA) at those ages with an assumed return of 7 percent a year. The two each contributed $2,000 a year, the teen for 10 years, the 30-year-old for 35 years.
The teen's total contribution was $20,000, the 30-year-old, $70,000, but because the teen started earlier, even though he contributed less over a shorter period of time, his nest egg was $410,186 by the age of 65. The 30-year-old contributed much more for a longer period of time, but at the age of 65, she had only $294,430 to tap.
Gives new meaning to "Time is money," huh?
Retirement (401)s work so well because you have to designate how much is withdrawn from your paycheck each pay period.
Money Adviser says use the same technique with other savings. Automate your deposits into your own IRA, certificate of deposit (CD), money market fund or simple savings account.
With some investment accounts you can even automate how your money is allocated to stocks or bonds to create a mix based on your current appetite for risk and the likely lower risk you'll prefer as your near retirement.
Some accounts even allow you to automate changes in the amount you designate for deposit, says the Money Advisor.
Work more, work longer
Turn a hobby into a part time job, flip some burgers on the weekend or otherwise take on extra work for extra income, whenever possible.
You may have to work longer to make up for lost time when you didn't save. Chances are Social Security won't cut it, if it's still around when you retire.
Bottom line? Take care of yourself financially now so you can do likewise in the future.
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