Though Social Security helps seniors stay afloat financially by providing some income for them, it's not enough to live on by itself. The average recipient today collects less than $18,000 in annual income, and while most seniors need roughly 70% to 80% of their former earnings to live comfortably during retirement, Social Security only provides about half that sum for a typical worker. That's why independent retirement savings are a must, whether in an IRA, a 401(k), or both.

But new data from GOBankingRates reveals that Americans aren't saving enough for their golden years. Currently, IRAs max out at $6,000 a year for workers under 50, and $7,000 a year for those 50 and older. Meanwhile, 401(k) contribution limits max out at $19,000 a year for workers under 50, and $25,000 a year for the 50-and-over set -- and, they're going up in 2020. Yet the typical worker's annual retirement contribution today doesn't even hit the halfway point on the IRA limit. And that means today's savers need to do better.

Coin being inserted into glass jar loaded with coins labeled retirement; jar is sitting next to a clock and three stacks of coins that increase in height as they get closer to the jar.


How Americans save, by age

Though today's workers aren't coming close to maxing out their retirement plans, there's a variance in contribution levels by age, as the following table highlights:

Age Range

Average Annual Retirement Plan Contribution











65 and older



Oddly enough, workers between the ages of 18 and 24 seem to manage higher contributions than those between the ages of 25 to 34. That could be due in part to the fact that millennials in this age range are starting families, and as such, have less money left over to fund their retirement savings after child care costs and other kid-related expenses are accounted for.

It's also not surprising to see that those 65 and over aren't contributing a whole lot to their savings. Many people in that age range are working part-time at best, or are gearing up to withdraw from their nest eggs rather than build them. But all told, workers need to be more aggressive in their savings efforts if they want to retire comfortably.

Today's savers risk a shortfall

Let's take a closer look at the $2,739.19 a year that workers in their mid-40s to mid-50s are setting aside for retirement, since that's the highest figure in the table above. That breaks down to about $228 per month. Now, if we assume that the typical saver has 45 years to sock away funds for retirement, and that a stock-heavy portfolio can generate an average annual return of 7% (which is a bit below the market's average), this means that a monthly contribution of $228 over four-and-a-half decades will produce a nest egg worth $781,800. And that's certainly respectable.

Here's the problem, though: Not everyone saves for that many years. Some workers don't get started till their late 30s, 40s, or even 50s. And when we take that $228 monthly contribution and 7% return, but apply a 25-year savings window instead of 45, we get an ending balance of just $173,000. That's not a ton of money to work with considering that most financial experts advice withdrawing from savings during retirement at a rate of 4% a year. With a $173,000 balance, that's around $7,000 a year of income. And since, as mentioned earlier, Social Security pays the typical senior under $18,000, all told, that's barely $25,000 annually.

The point? The closer workers of all ages get to maxing out their annual retirement plan contributions, the more financial security they'll buy themselves. And while doing so for a 401(k) could prove quite challenging, maxing out an IRA, or contributing the equivalent to a 401(k) on a yearly basis, is far more attainable. Doing so could boil down to making smarter lifestyle choices, or even modest sacrifices, like renting a smaller home over a larger one, dining out less frequently, and being frugal when taking vacations. Getting a second job could also prove instrumental in boosting savings.

While setting aside some amount of money for retirement is better than socking away none at all, today's workers should make an effort to eke out additional savings. Otherwise, they really risk struggling once their golden years roll around.