Just 18% of Americans report feeling very confident about having enough money saved for retirement, while three in 10 workers are so worried about retirement that they report feeling mental or emotional stress. 

Saving for retirement may seem complicated on the surface, but there are really only three big questions you need to answer to determine whether you're on track to retire rich or if you're likely to face financial shortfalls as a senior.

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Image source: Getty Images.

1. How much are you investing -- and when did you start? 

According to Vanguard's "How America Saves" report, 401(k) plan participants contributed 6.2% of income to their 401(k)s in 2016. According to conventional wisdom, Americans need to save at least 10%. Unfortunately, however, neither 6.2% nor 10% is likely to be enough, unless your employer is generous about matching your contributions.

Ideally, you should aim for a savings rate of around 15% to 20% of your income. That means if your employer matches 50% of your contributions, you could save around 10% to achieve that minimum 15% savings ratio -- but if you receive a lower match or no match at all, you'd need to put aside at least 15% of your income on your own. And if you wait to start until you're older, your savings rate should be even higher to make up for lost time.

Data from the U.S. Census in 2016 revealed median income per capita of $31,099. Older workers typically had higher income than the median, but workers of all age groups had one thing in common: If they earned around what others in their peer group did, then a total savings rate equaling 10% of their annual income wouldn't be enough to accumulate $1 million in retirement savings. And while your own retirement goal may not equal exactly $1 million, you should typically aim for at least this much to afford a reasonable standard of living and the healthcare you're likely to need as a senior. 

Consider this chart showing the annual savings necessary to save $1 million by age 65 if you earn 7% annual returns, depending upon the age when you begin investing.

Age You Begin Investing

Annual Savings Required to Become a Millionaire by Age 65

20 $3,164
30 $6,662
40 $14,808
50 $37,859

Table calculations: Author. 

As you can see, investing far more than 10% of income is generally necessary. And if you've put off saving, retiring with $1 million will be difficult or impossible unless you get really serious about investing. For someone aged 50 to 54 with a median income of $54,578, retiring with $1 million would mean investing around 70% of those earnings -- which is likely impossible. 

To figure out exactly how much to save for retirement, determine how much income you'll need and how much you must save to produce it. If your savings is below that amount, rework your budget and cut expenses to increase savings. 

2. What are you investing in?

Your choice of investments matters just as much as the amount you invest. If you make irresponsible choices and invest in penny stocks or speculative get-rich-quick schemes, you could end up broke long before retirement and have no savings to speak of when you reach your golden years. But you can do almost as much damage to your long-term goals by investing so conservatively that your investments don't even keep up with inflation. 

The calculations above were based on 7% returns, which is reasonable with the right investment mix -- but what if your returns differ because of what you invest in? This chart shows how different returns impact what you'd need to save each year to retire a millionaire at age 65 if you started investing at 30.

Return on Investment

Annual Savings to Become a Millionaire

2% $19,610
4% $13,055
5% $10,544
6% $8,466
8% $5,373
10% $3,354

Table calculations: Author.

To decide on the right mix of investments, subtract your age from 110 to determine the percentage of your money to invest in stocks. You can then invest the remainder in bonds and other low-risk, income-generating assets. If you want to be more aggressive, allocate more of your portfolio to stocks -- but the older you are and the less time you have to wait out market downturns, the more you'll need to reduce your risk.

To get your money into the stock market, you don't need to know much about stocks either. Low-cost ETFs allow you to easily build a well-balanced portfolio that tracks the U.S. market, emerging markets, real estate, or other asset classes.  Even buying a single ETF -- the Vanguard S&P 500 ETF (NYSEMKT:VOO) -- could be enough to give you sufficient exposure to stocks, as this ETF allows you to track the market while paying an ultra-low expense ratio of just .04% . 

3. What are you paying in fees?

Because you're investing over such a long time period, the amount you pay in fees makes a huge impact on what your account is ultimately worth when you hit retirement age.

This table shows the impact of fees on retirement investments if you make a $5,000 annual investment in a 401(k) or IRA earning 7% returns from age 30 to 65. 

Fees

Savings at Retirement

Amount Lost Due to Fees

Additional Annual Contributions Needed to Cancel Out Fees

0%

$691,184.39

0

0

0.5%

$620,173.45

$71,010.94

$575.51

1%

$557,173.90

$134,010.49

$1,202.59

1.5%

$501,256.82

$189,927.57

$1,894.51

2%

$451,601.54

$239,582.86

$2,652.59

2.5%

$407,483.09

$283,701.30

$3,481.14

3%

$368,261.12

$322,923.27

$4,384.43

3.5%

$333,370.06

$357,814.33

$5,366.62

Table calculations: Author. 

You'd need to more than double the amount invested if you paid a 3.5% fee versus a 0% fee.

There's no reason to put yourself in a position where you must invest so much more because you're paying fees that are so high.

Unless the investment you've chosen outperforms the market by enough to justify costly fees, opt for investments like low-fee ETFs or consider using inexpensive robo-advisors such as Betterment or Wealthfront. 

If your 401(k) offers only high-fee options, talk with your employer about your concerns and -- unless the problem is corrected -- consider investing only enough to earn the full employer match and then investing in an IRA that provides access to a wider variety of affordable investment products. 

Start today to make your retirement a more secure one

If your answers to these questions reveal you're not saving enough, or you're not investing in the right assets, or you're paying too much to invest, then take action today. 

By following a few simple steps to retire rich, you can retire with plenty of money to enjoy your golden years. 

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