Most seniors can't live well on Social Security alone. The average recipient today gets a little over $18,000 a year in benefits, which may be enough to cover some basic expenses, but isn't enough to pay for extras -- things like modest leisure and entertainment that are essential to a happy retirement.
It's for this reason that workers are encouraged to save diligently for their golden years -- especially since Social Security benefit cuts can't be ruled out. But amazingly, 30% of people in their 50s saved $0 for retirement in the last year, according to the SimplyWise September 2020 Retirement Confidence Index. And given that some 50-somethings may be just a handful of years away from leaving the workforce for good, that's pretty alarming.
Why are older workers neglecting their savings?
A lot of people have had no choice but to put their retirement savings on hold since the coronavirus outbreak hit. But SimplyWise found that almost one-third of workers in their 50s saved nothing for their senior years over the past 12 months. Since the pandemic really only started having an impact in March, that means older Americans were neglecting their savings well before it began.
Of course, some people may not realize what little money they're in line for from Social Security -- whether because they're unaware of how the program works or they've never actually looked at an earnings statement before, which estimates recipients' monthly benefits. But either way, if you're an older worker who hasn't been making retirement account contributions, now's the time to assess your savings and potentially make a plan to play catch-up.
Ideally, you should be able to close out your career with 10 times your ending salary in your IRA or 401(k). Or, to put it another way, if you're in your 50s earning $80,000 annually, an $800,000 balance would certainly be good to aim for. If that's not doable, though, save what you can. But be sure to save something.
Furthermore, the good thing about being 50 or older is that you get an opportunity to make catch-up contributions in your retirement plan, which means you can max out your IRA this year at $7,000, or max out your 401(k) at $26,000. Now if you've saved nothing for the past year, a $26,000 contribution is pretty unlikely. But again, do what you can -- both this year and beyond. If you manage to sock away $300 a month for retirement over the next 10 years, and your investments in your account generate a somewhat conservative 5% average annual return, you'll boost your nest egg by over $45,000.
Of course, some people are struggling financially right now due to the ongoing pandemic. If you're one of them, you may not be in a position to save for retirement immediately. But if that's the case, plan to ramp up once your circumstances improve. Your 50s are the perfect time to focus on retirement and set yourself up for the most financially secure future possible -- and you don't want to let that opportunity go to waste.