If you haven’t started saving for retirement, you should begin right away. Putting off adding to your savings will be detrimental. You’ll have to face several challenges over the next few years, but by starting today you’ll set yourself up for a comfortable retirement.
Fewer Employers Are Offering Traditional Retirement Plans
During recent years the burden of saving for retirement has shifted from the employer to the employee. Now most employers offer defined contribution retirement plans instead of defined benefit plans, also known as pensions. 88% of private sector workers who had a workplace retirement plan had pensions. The number has dropped to just 33%.
If you start taking advantage of your 401k now, you can still set yourself up for future saving success. While these employer-sponsored retirement plans are still subject to market and investment risks, the earlier you start saving, the more money you’ll be able to gain through positive compounding.
By starting to save for retirement at a young age, you can net twice as much as you would if you put off saving for retirement.
People May Outlive Their Savings
Thanks to improved healthcare and quality of life, more and more Americans are living for longer periods of time. According to the CDC’s National Center for Health Statistics, the average life expectancy for those born in 2018 is 78.7 years.
One significant effect of an extended lifespan is that people will spend more years in retirement. This means that you will need more money in your retirement account to cover your cost of living. Healthcare expenses are also expected to rise in the future, so you’ll need to save more money to cover these additional costs.
Social Security May Not Be Enough
Your social security benefits alone may not be enough to cover your costs of living after you retire. Today, Social Security programs are facing issues of long-term insolvency. The program may need to go through obstacles such as borrowing from other areas of government, increasing taxes, or slashing benefits. In the future, these benefits may be reduced to only three quarters of what beneficiaries were told they could expect. While Social Security benefits likely won’t disappear completely, you should plan on supplementing them in order to pay for retirement.
There are many challenges to saving for retirement. The best way to overcome them is to take a proactive approach. Start saving today!