Have you ever worried that you might be falling behind on your retirement planning? It isn't uncommon and for good reason as our standard of living in retirement may be directly connected to how well we plan for it during our earning years.
Actually, most Americans worry about retirement. According to the U.S. Bureau of Labor Statistics' 2014 National Compensation Survey, only 53 percent of non-military workers contribute to a retirement plan.
The group most at-risk of falling behind? Part-time and low-income workers, as their employers are less likely to sponsor retirement plans that utilize payroll deductions. As more Americans transition into working for small businesses -- that are less likely to offer retirement savings plans -- and are forced to work more than one job just to make ends meet, it grows more difficult for workers to put money aside for their golden years. That's lead many retirement plan advisors to warn of a potential retirement crisis in the U.S.
Decreasing Financial Literacy: Lack of Investment Guidance?
Americans' low participation rates in retirement planning makes more sense when viewed in the context of decreasing financial literacy rates. When you consider that less than half of American adults track spending and keep budgets, a quarter of Americans have no savings to speak of, and three-quarters of households live from paycheck to paycheck, it's easy to see how retirement savings and planning could be passed over in favor of paying the rent.
Part of the problem may be that Americans' financial literacy levels aren't exactly stellar. The majority of American teens don't receive financial education in school, leading to adults who don't really grasp the full importance of saving for retirement.
But even for low-income households, putting away a small amount could grow into a more substantial retirement fund over time. For instance, saving $100 a month over several decades could result in a healthy retirement account. Unfortunately, for many, the focus isn't on saving for the future, especially when that might mean living modestly in the present.
Retirement Savings: Part of a Comprehensive Financial Plan?
Retirement plan participation trends also vary by industry, with state and local government employees reflecting the highest percentage of retirement plans, with about 81 percent contributing to plans, says the Bureau of Labor. Union employees participate in retirement savings plans at rates from 83 to 89 percent, while non-union participation ranges from 48 to 74 percent. Not surprisingly, full-time workers are up to three times more likely to contribute to retirement accounts than are part-time workers.
Another sign of trouble to come, say retirement investment advisors, is that many Americans wait until much later in life to start saving - a decision that can have significant consequences during the retirement years. For instance, a 25-year old who starts saving a few thousand dollars a year at a 10 percent annual return rate has the potential to have almost double the balance of someone who starts saving the same amount at age 35, thanks to compound interest.
So what's the solution? To start saving immediately. No matter what point you're at in your career path, talk to your retirement investment advisor about starting to contribute to a retirement account now. Even if you have to start small, you'll thank yourself later.