There's a reason saving for retirement is such a critical thing to do: Once your career wraps up, you'll need income outside of Social Security to cover your living costs. And if you don't save on your own, you might fall short as a senior.
In fact, Social Security will only replace about 40% of the income you're used to if you're an average earner. And many seniors find that they need about twice that much income to maintain a comfortable lifestyle and also have enough money left over to fill their days in a meaningful way.
Meanwhile, recent data from Transamerica shows that 65% of workers feel they're currently building a large-enough nest egg to meet their future needs. But this means that more than one-third of savers aren't happy with how they're doing savings-wise, or fear they're not saving enough. If you fall into the 35% of people who lack confidence in their retirement savings, here are some key steps to take.
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1. Ramp up your savings rate slowly but steadily
If you're currently saving 8% of your paycheck for retirement, it's unlikely that you'll magically be able to go from doing that to socking away 20% of your income overnight. But if you can go from saving 8% of your paycheck this month to 9% next month, and then 10% the month after that, you can slowly but surely work your way to a more aggressive savings rate. That's apt to make a huge difference.
2. Make sure you're claiming your full 401(k) match
If your employer sponsors a 401(k) plan and also offers a matching incentive, it pays to do whatever you can to snag that match in full. After all, that's free money for your nest egg -- money that can bring you closer to your ultimate savings target.
You may need to make some sacrifices to claim your full match, like cutting back on leisure spending. But if you give some things up now, you may not have to give up things that are important to you in retirement.
3. Aim to invest your savings aggressively
The events of the past 12 months have left many people feeling nervous to invest money in stocks. But if retirement is many years away, stocks are a good bet for your nest egg. They're likely to deliver a higher return than more stable alternatives, like bonds, and you need that higher return to grow your savings at a decent rate -- one that can outpace inflation.
Now that said, if you're not comfortable handpicking individual stocks, there's nothing wrong with falling back on broad market index funds. Putting money into an S&P 500 index fund, for example, is a good way to diversify without having to do a lot of legwork.
It's encouraging to hear that the major of retirement savings are happy with the progress they've made and feel confident that they're saving enough. But if you feel differently, these moves could really change your outlook for the better.
