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If you’re going to have a habit, it’s best to have one that will enhance your future, don’t you think? According to a recent retirement readiness survey, 54% of American workers are “habitual savers,” meaning they always save for retirement. That’s a pretty good habit to have since those folks are likely well on their way to a secure retirement thanks to their consistent savings practices.
Unfortunately, they make up slightly more than half of all Americans who will eventually face retirement. What about the other half?
According to the survey conducted by Aegon, that other half is made up of four categories of savers:
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- 21% are “occasional savers.” They save for retirement from time to time.
- 11% are “past savers” who are not saving for retirement now, but they have in the past.
- 10% are “aspiring savers” who intend to save for retirement someday.
- 4% are “non-savers” who have never saved for retirement and never plan to.
So what’s standing in the way of people who aren’t currently saving for retirement? According to the retirement readiness survey, 80% of workers believe it’s their personal responsibility to build their retirement nest egg, but only about 25% have an actual written retirement strategy—nearly one-third have no strategy at all!
Clearly, there’s a disconnect between what we know we should be doing and what we’re actually doing. For a lot of us, we’re just too busy living our lives now to think too far ahead in the future. We’re afraid that serious retirement saving will cut into our lifestyle. Don’t we deserve to live it up now? Isn’t there plenty of time to save for retirement later? Does that sound familiar, Aspiring Savers?
Good Intentions Fade Fast
Past editions of the Aegon study show how that attitude, if left unchecked, plays out over the years. According to the 2015 retirement readiness survey, younger workers were the most optimistic about their retirement prospects with 46% of 25–34-year-olds saying they were extremely confident in their ability to afford a comfortable retirement.
But by the age of 38, the average Aspiring Saver sees things much differently. Only 9% were still confident they could have a comfortable retirement lifestyle. That’s because most Aspiring, Occasional, and Past Savers fall into that half of Americans who have less than $10,000 saved for retirement. Without a consistent retirement savings habits, their outlook is pretty shaky.
Build Habits That Will Build Your Future
Making the leap from an Aspiring, Occasional or Past Saver to a Habitual Saver doesn’t have to be a big deal.
1. The B-Word. Start by taking control of your money with a monthly budget. Workers commonly point to cost of living and day-to-day expenses as reasons for not saving more for retirement. A budget gives you the power to decide what your money will do, like pay off debt or save up an emergency cash cushion. With those obstacles out of the way, you can then focus on building your retirement savings.
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2. Just Start Saving. Next, sign up to participate in your workplace retirement plan or 401(k). It sounds like simplistic advice, but investing in a 401(k) is a gateway to increased retirement savings. Workers with money in some sort of retirement plan have significantly more retirement savings than workers without a plan. Plus, two-thirds of those who contribute to a workplace plan also have money invested in an IRA, and half have retirement money stashed away in addition to their 401(k) and IRA.
3. Automate. One of the best features of a workplace retirement plan is that you invest in it each month automatically. The money is taken directly from your paycheck. You don’t have to transfer funds or write a check, making it a virtually painless way to build up your retirement savings.
You can do the same with an IRA or Roth IRA. Simply sign up for automatic contributions when you open your account and adjust your budget accordingly. After a couple of months, you won’t even notice the change in your income.
4. Strategize. The 2016 survey also discovered that 74% of Aspiring Savers and 81% of Non-Savers do not have a retirement strategy. A written retirement savings plan is an important first step to help these groups build strong savings habits. Need help? Find an investing professional in your area today!