Most Americans Struggle to Save for Retirement
When it comes to funding their retirement, many Americans have to rely on their savings. Unfortunately, financial stress often makes it difficult for workers to save. According to a recent CNBC Your Money Survey conducted by SurveyMonkey, 74% of Americans are feeling financially stressed, with 37% indicating that they are “very stressed” about their personal finances.
In late August, over 4,300 adults in the U.S. were surveyed, and the top stressors remained the same as in April: inflation, rising interest rates, and a lack of savings.
How You Can Fund Your 401(k) Plan
Financial strains not only cause stress but also make it harder for workers to contribute to a retirement plan. The CNBC Your Money Survey found that 41% of workers don’t contribute any money to a 401(k) or employer-sponsored plan. This means they are missing out on a valuable opportunity to improve their financial security for the future.
On the other hand, the survey revealed that 57% of workers are contributing to a 401(k) or company-based savings account. Among those who contribute, different methods of funding their 401(k) plans were identified:
- 46% contribute as much as they can afford.
- 24% put away as much as their employer will match.
- 11% save up to the employee contribution limit for the year.
- 8% save the automatic default amount set by their plan.
Maximizing 401(k) Contributions and Company Matches
In 2023, workers under 50 can save up to $22,500 for retirement in 401(k) plans, while those 50 and older can contribute an additional $7,500 in “catch-up” contributions. Some plans also allow for after-tax 401(k) contributions, potentially enabling workers to save up to the total 401(k) plan limit of $66,000, or $73,500 with catch-up contributions.
According to Fidelity, the average company match in a 401(k) plan was 4.7% of a worker’s salary in the second quarter of 2023. Additionally, the average default contribution rate for auto-enrolled employees reached 4.1% in that quarter.
Concerns About Saving Enough for Retirement
After contributing to their 401(k) savings, many workers are unsure about where their money is being invested. The survey found that 46% don’t know what investments are in their 401(k), and only 54% are aware of their investment choices.
Furthermore, 56% of workers admit that they are not on track with their yearly 401(k) savings to retire comfortably, while 42% believe they are on track.
Guidance for a Secure Retirement
- Save enough to get the employer match: It is highly recommended to contribute at least enough to a 401(k) to receive the employer match. This match can significantly impact your overall savings.
- Boost your emergency fund: Establishing an emergency fund is essential before focusing on long-term retirement savings. Aim to save three to six months’ worth of living expenses in an easily accessible account.
- Prioritize paying off high-interest debt: While it may make sense to contribute less to your retirement savings temporarily, reducing high-interest debt can alleviate financial stress and create a more solid financial foundation.
Hot Take:
Securing a comfortable retirement requires strategic financial planning. By understanding your options, maximizing contributions, and prioritizing financial stability, you can work towards a more secure future.
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