Americans are woefully bad at saving for retirement -- and there's only so much the government can do about that.

And that's why the newest changes in tax policy (plus newer ideas currently being tossed around) can't make that big of a difference, according to a new study from the Center for Retirement Research at Boston College.

Some have suggested that the government raise the 401(k) contribution limits, but doing so won't have an impact on the vast majority of Americans -- only those doing well financially and already saving the maximum amounts for their retirement planning.

To reap the benefits, people will have to work longer, spend less, start setting aside more in their 401(k)s, and maximize their Social Security benefits by waiting longer to take them -- although no one wants to hear that.

The federal government in 2001 introduced the catch-up provisions to those 50 and older, in addition to increasing the overall limits. All that did was boost contributions for those already at the limit, and today only about 10% of participants are constrained by them, says Matt Rutledge, a research economist at the center.

People can set aside up to $18,000 for their salary for a 401(k) plan, and if they're 50 and older, they can set aside another $6,000. Increasing that limit doesn't offer a broad-based solution for low savings rates, even though the money's not taxed until it's withdrawn, Rutledge says.

There's no doubt that 401(k)s have helped people in their retirement savings, Rutledge says -- the typical 401(k) participant saves about $3,000 to $4,000 a year. But many are not even close to reaching the limit.

When accounting for 401(k) savings, Social Security, and even people's homes, Rutledge estimates that about 50% of the population will come up short in retirement and will have to see their lifestyle take a hit.

"That's the most optimistic view," he says. "Other than working longer, which people are starting to do, or delaying Social Security, which people are starting to do, the only other thing they can do is add to that 401(k). With people living hand-to-mouth and incomes not growing all that fast, it will be tough for people to do that."

Rutledge says the positive news about 401(k)s is that once people start them, they continue them and leave them alone for the most part. They don't even think of it as money they earned.

"They don't feel it's money to tap into," Rutledge says. "It's yours, but it's for your future self. You have that power of compounding because it's set aside, and it's not part of their mental budgeting."

401(k) pitfalls and tips
Yet some people are still borrowing against their 401(k)s when they shouldn't, even if they don't get a penalty when they use the funds for a down payment on their first home or their child's college education, Rutledge says.

"If that's your only money for those, it's understandable, but there are better ways to do it," Rutledge says. "It should be for your retirement. If you're using your 401(k) funds for that, you're not using it right."

Rutledge says it's not too late for those in their 50s to make a dent in their retirement savings by putting more money aside in their 401(k)s. For those who plan to work until their mid to late 60s, the power of that money compounding will be huge for their retirement.

And if you're a parent, you should explain to your children that if you can prioritize your own retirement planning, then they won't have to support you financially later on.

"The temptation to tap into that money is quite obvious for people in their 50s, whether they're paying for their kid's education or paying for a second home or your kid's wedding," Rutledge says. "If you take that money out, there's always that risk that you're not going to pay yourself back on some other returns in the meantime. That's the last thing you want to do."

Practical advice on rebalancing investments for retirement
As for his advice regarding planning for retirement, Rutledge says people need to focus on rebalancing their accounts as they get older and make sure they're not investing in anything too risky.

"You want to have your money there when you need it," Rutledge says. "Making it more secure, even with things like bond indexes, is probably a good move. You're OK in equity index funds, but you want to avoid equity growth funds. You could do well, or you end up chasing yields, and it's not going to play out for you."

Rutledge says you should reduce your equity allocation as you get older -- unless you're already in a target date fund, which does it for you automatically. Many people don't use target date funds or are scared off by the fees, he says.

By the time you reach retirement, Rutledge suggests having 20% to 30% of your money in equities. When people start investing, they should have 80% to 90% invested in equities, and then work their way down to about 50% when they reach 50, gradually reducing their stock exposure throughout their 50s.

Says Rutledge:

Unfortunately, there's no magic bullet. If your income is not still growing, and you're not able to give in to the fact that your kids are moving out and you should be spending less, it's going to be really hard to find money to put into that 401k that's so essential. Social Security is not getting any more generous and probably going the other way. With health costs continuing to grow, even if it's at a slower rate, people's fears aren't going to be assuaged at all. You are really going to have to see if you can save more, and that means making some sacrifices. That probably means spending a little less, but that's the not the advice people want to hear.

Staying in the labor force and working longer will be important for Baby Boomers. People are starting to get that message, and they don't feel like they have to retire at 62 just because Social Security is available at that age.

Employers are doing more to keep older employees in the workforce by allowing them to work part-time or reducing their responsibility so their jobs are less strenuous and they can work longer, Rutledge says.

He continues:

That will do well for your 401(k) portfolio. And you get Social to pay you a little extra when you retire. You can't beat that kind of annuity in the private market. People are getting that message. We have been banging that drum for a number of years now, but we're finally seeing people starting to increase their average retirement age. It has moved up to 63 and 64 to about 65 now.

This article originally appeared on nowitcounts.com.

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