It's safe to say that a good portion of today's workers are struggling to prepare for retirement. Half of adults age 55 and older have nothing at all saved for retirement, according to a report from the U.S. Government Accountability Office, and among baby boomers, the median amount saved is just $152,000, according to the Transamerica Center for Retirement Studies.
Because so many Americans are struggling to save, it's not uncommon for people to continue working past the traditional retirement age. In fact, nearly half (46%) of employees say they expect to work past age 65, according to a survey from Northwestern Mutual.
Those who expect to work past age 65 out of necessity (rather than by choice) also have several concerns in common. According to the survey, the most common reasons workers expect to postpone retirement include uncertainty that their savings will last the rest of their lives, not being able to rely on Social Security, and rising healthcare costs.
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The very real retirement struggle workers face
The primary worry among workers struggling to save is that they won't be able to save enough to retire comfortably, and 78% of workers said that's why they're putting off retirement. That makes sense, considering the $152,000 typical baby boomers have saved. Even if you spend a modest $30,000 per year on top of Social Security benefits or other income sources, that $152,000 will only last around five years. Then, once your personal savings run dry, you'll likely be left to depend on Social Security alone.
Fifty-six percent of survey participants feel that Social Security won't provide enough for them to live on, which is another valid concern. The average beneficiary only receives $1,471 per month, according to the Social Security Administration, which may not be enough to cover all your retirement expenses without making serious cutbacks -- especially as you age and healthcare expenses continue to increase.
Rising healthcare costs are workers' third-biggest concern, with 49% of survey respondents reporting feeling worried about these expenses. Healthcare is one of the most significant costs you'll face in retirement, and the average person currently in their 40s can expect to pay around $335,000 in total healthcare costs throughout retirement, according to a study from Urban Institute. Those who live into their 90s will likely pay even more, averaging around $500,000 total throughout retirement, according to the study.
With a lack of savings to start with, not much help from Social Security, and healthcare expenses that cost an arm and a leg, it's no wonder Americans are working longer to save more. If you're among those who are struggling to prepare for retirement, there are a few things you can do right now to improve your chances of retiring comfortably.
Supercharging your savings to have the best retirement possible
It's true that healthcare costs continue to rise, and you may not be able to depend on Social Security in the next few decades. (Although the program is not going to collapse, benefits could potentially be cut in the future.) You may not have any control over healthcare expenses and the future of Social Security, but you can come up with a strategy to ensure you're as protected as possible.
For example, if you're concerned about healthcare costs, you may opt to enroll in a health savings account (HSA). With an HSA, you can contribute up to $3,500 per year (or $7,000 per year for families) of pre-tax dollars, let that money grow tax-free, and then withdraw it tax-free, as well, as long as it goes toward qualifying medical expenses. One caveat is that you must be enrolled in a high-deductible healthcare plan to open an HSA (meaning you have a deductible of at least $1,350 for individuals or $2,700 for families), but if you're eligible, it's a great way to prepare for steep healthcare costs. Those 55 or older can add an extra $1,000 to their contributions.
Additionally, there are a few ways you can boost your Social Security benefits so you're receiving fatter checks each month. For example, by waiting beyond your full retirement age (FRA) to begin claiming benefits, you can receive extra money each month. If you were born in 1960 or later, your FRA is age 67. By waiting until age 70 to claim, you would receive an extra 24% on top of your full benefit amount -- which can make a big difference if your benefits will be a significant source of retirement income.
Another way to increase your benefits is to work a few years longer. Your basic benefit amount (or the amount you'd receive by claiming at your FRA) is based on your 35 highest-earning working years, and chances are you're earning a lot more now than you were when you first started your career. By working a few extra years, you can replace some of your lower-earning years with higher-earning years, thus increasing your average income, as well as your basic benefit amount.
Finally, it never hurts to simply try to save more before you retire. Create a thorough budget to see where all your money is going, and see if you can reallocate some of your cash to your retirement fund. Sometimes, all it takes is cutting each spending category by $10 or $20 per month to save hundreds, which can go a long way when you're saving for the future. And keep in mind that if you're not willing or able to make sacrifices now, you'll likely have to make sacrifices once you retire.
If you're struggling to save for your golden years, you're not alone. Many workers are postponing retirement because they're concerned about their financial futures. If you're one of them, these financial strategies can help boost your savings and set yourself up for retirement success.
