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Source: Social Security Administration. 

Saving for retirement might appear to be a pretty straightforward process that involves moving from Point A to B. But in most instances, life has its way of throwing twists and turns at consumers, resulting in fewer Americans being prepared for retirement today than in generations past.

America has a saving problem
According to the 2014 Survey of Household Economics and Decisionmaking, conducted by the Federal Reserve, 38% of the more than 5,800 respondents answered that they had no intention of retiring, or planned to work for as long as possible. Furthermore, 31% of non-retirees had no retirement savings or pension whatsoever, including a quarter of people in the survey aged 45 and up.

Americans that aren't able to sock away ample savings while working could be forced into relying heavily on Social Security during their golden years, or may have to work well past what most people consider the typical retirement age of 62 or 65.

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Source: Flickr user Dan Moyle.

The problem with the latter plan is that your health and/or employer may not accommodate you working into your 60s or beyond. In regards to the former, Social Security benefits are only designed to replace about 40% of a workers' income in retirement. With the Social Security program witnessing a major demographics shift whereby baby boomers are retiring in droves and people are on average living longer than ever, the Trust's cash inflow will soon turn into a notable cash outflow. If nothing is done to fix the Social Security system, then a benefits cut of up to 23% could be expected by 2033. That's bad news if you're heavily reliant on Social Security in your golden years.

The solution is pretty simple: we all need to be more diligent about saving, and we all need to implement these changes as soon as possible since time and compounding are the greatest ally of future retirees.

Fewer than one in five Americans are making this smart money move
However, according to a new survey from Bankrate that accompanied its Financial Security Index for August, very few American workers are saving enough to retire comfortably.

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Source: Social Security Administration.

Bankrate questioned 1,000 adults from across the U.S. about their retirement saving habits on a year-over-year basis. Specifically, Bankrate was interested in finding out whether Americans were contributing more, the same, less, or not at all, to their 401(k)s or IRAs. A whopping 55% of respondents noted that they were saving the same amount this year as they were in the previous year. Another 14% admitted to saving less, and one in 10 respondents copped to the fact that they aren't saving a cent toward their retirement. Just 19%, fewer than one in five people, were on track to put away more in their retirement savings accounts this year than they did last year.  

This is a worrisome set of results for three reasons.

First, a majority of Americans are already behind on where they should be when it comes to their retirement savings. To witness such a small percentage of respondents admit to saving more would imply that millions of Americans may still fall short come retirement.

Secondly, witnessing so few Americans fail to boost their retirement savings has me questioning the financial literacy of workers. In 2015, the maximum amount a worker can contribute to a 401(k) rose to $18,000, up from $17,500 in 2014. This means workers who simply bumped up their maximum contribution to the new limit would have contributed more on a year-over-year basis. But Bankrate's data implies that few Americans are likely maxing out their annual 401(k) retirement contribution.

Finally, Bankrate's survey results suggest that Americans aren't taking full advantage of the potential tax-savings associated with a 401(k) or IRA. Not taking advantage of the ability to defer taxation, or skirt taxation completely with a Roth IRA, could wind up costing workers in the long run.

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Source: Social Security Administration.

Change is needed now
If there's one primary takeaway from Bankrate's survey, it's that change is needed sooner than later for many workers. Time can be the friend or foe of all workers, depending on when they begin investing for retirement. Waiting even a few years can have drastic consequences on your ability to retire on your own terms.

For example, assuming that an investor can average an 8% annual return (a reasonable expectation considering that's what the stock market has gained, on average, per year over the long run), a worker who invests $200 a month for 45 years (i.e., beginning at age 20) would end up with $1.05 million come age 65. A worker who saves the same amount per year but starts at age 25 would only wind up with $717,200 come retirement, while waiting till age 30 to begin saving $2,400 a year would further knock your potential nest egg down to less than $485,000. Every day that ticks by is a missed opportunity to begin investing or to increase your retirement savings if you can afford it.

Secondly, workers need to know their limits -- and by limits I mean their available contribution limits, because the survey suggests most Americans may not know them.

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Source: Federal Reserve Bank of New York.

Keep in mind that 401(k)s and Roth IRAs do have certain income limitations (you can discover these limits in detail on the IRS website) which could hinder or halt your ability to invest in certain tax-advantaged retirement accounts. However, most workers will qualify for the highly lucrative Roth IRA, which allows a maximum contribution of $5,500 for workers aged 49 and under in 2015, and $6,500 for people aged 50 and up. Roth IRAs are geared for the long-term investor and allow your investments to grow completely free of taxation. For our fictitious 20-year old who retired with more than a million dollars above, a Roth IRA could be the difference between paying in the neighborhood of $200,000 in taxes on his or her investment gains versus keeping every cent.

Lastly, Americans -- and especially millennials -- have to get over their aversion to the stock market. A Money Pulse survey from Bankrate in April showed that a mere 26% of millennials under the age of 30 owned stock. Additionally, living through the 2008 recession and the market swoon over the last week certainly hasn't championed the idea to young workers that they should be investors in the market.

Yet, over the long run, no other investment vehicle has shown a better affinity to outpace inflation and create real wealth for Americans than the stock market. While savings accounts, CDs, and bonds might seem like a sure win for investors, they may not outpace inflation, leading to nominal money gains but real money losses.

Now might be a good time to ask yourself: "What changes am I planning to make to increase my chance at a comfortable retirement?

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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