Back in the day, it was possible to retire comfortably without actively saving a dime. That's because pensions were common decades ago, and many companies offered this safety net to workers who remained loyal for a long time.
These days, employer pensions are rare, as is staying with the same company for 40 or 50 years. That's why it's really important for workers today to take retirement savings matters into their own hands.
You might already have an IRA or 401(k) plan that you've been funding for some time. But if the following signs apply to you, you may not be saving enough and may have to increase your contributions as soon as possible.
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1. You haven't saved the equivalent of your annual salary by age 30
Fidelity says that by age 30, you should ideally have enough money in your retirement plan to replace a year of earnings at your current salary. That's a good guideline, so if you're 30 years old earning $70,000 a year and your IRA or 401(k) is barely at the $25,000 mark, you have some work to do.
One thing it pays to do in that situation is to conduct a spending audit. Take a look at your monthly bills because chances are, there's at least one expense you can afford to eliminate or reduce. That's money that can easily go into your retirement plan.
2. You're not socking enough away in your 401(k) to claim your full employer match
It's somewhat common for companies to offer matching contributions in a 401(k). But unless your employer offers a really large match, like $10,000, you should aim to put in enough to get your match in full
Vanguard reports that in 2021, the average employer retirement match was 4.4% of an employee's pay. If you earn $70,000 a year, you'd need to contribute $3,080 a year to claim your match in full. If that's not happening, you're not allocating as much of your salary to retirement savings as you should be.
3. Your savings rate hasn't increased through the years, even though you've been working for a while
It's one thing not to increase your retirement savings rate from one year to the next when it's only your second or third year holding down a full-time job. But if you've been working for a decade or longer and haven't increased your savings rate, it's time to reexamine your spending and reset some priorities.
One thing you may want to do in conjunction with your next raise is allocate all or at least some of the new money to your retirement savings off the bat. If you don't get used to having that extra money, you may not be tempted to spend it.
Shorting yourself on retirement savings will only result in financial stress later in life -- and that's not what you want. If these signs apply to you, make an effort to start saving more for your future.
