35% of Americans Are Concerned About Saving for Retirement. Here's How to Know if You're on Track

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KEY POINTS

  • It's important to retire with a nest egg that can support you financially.
  • You're in good shape if you're saving 15% of your income or more, you keep increasing your savings rate, and your money is growing at a nice clip.

The idea of retirement can be scary to a lot of people. After all, you're going from earning a paycheck from a job to having to live off of savings. And given that you're apt to face a host of expenses as a retiree, from housing to healthcare, you might worry that your nest egg is going to let you down.

A recent CFP board survey found that 35% of Americans are very concerned about preparing for retirement. If you're worried that your savings aren't cutting it, that's understandable. But here are a few signs you're actually in really good shape.

1. You're saving a nice portion of your income in an IRA or 401(k)

Once you have enough money in savings to cover three months of living expenses, it's a good idea to focus on funding a retirement plan. It's generally advisable to sock away 15% of your income or more, if possible, in an IRA or 401(k) plan. So if you earn $50,000 a year and are contributing $6,000 to your IRA, that's actually a really respectable sum, even though $6,000 may not seem like a ton of money.

2. You're boosting your savings rate every year

When you first start working, it can be difficult to part with large chunks of money -- especially if you're only bringing home an entry-level salary. But if you're increasing your IRA or 401(k) contribution rate year after year, that alone is a sign you're getting to a good place.

So, let's say you started working a few years ago, and your out-of-college salary was $35,000. Let's also assume you put $1,200 into your IRA that year, which represents about 3.5% of your income. If, at this point, you're earning $40,000 a year and you're putting $3,000 into your IRA, that's 7.5% of your income. If you keep up that pattern, you should eventually get to the point where you're socking away 15% or more of your earnings.

3. You're generating solid returns

Let's say you've been contributing $100 a month to your IRA for the past five years, or 60 months. That means you've put in $6,000 from your earnings.

But if your IRA balance is now at $9,000, it means you've been snagging around a 9% annual return on your money. That's pretty impressive, and largely on par with the stock market's average return. And if you keep your IRA invested savvily, as you're able to ramp up your contributions, you may find that your balance is really able to soar.

It's easy to worry about not having enough money in retirement. But if these signs apply to you, it means you're doing a good job of saving. That doesn't mean you can't, or shouldn't, aim to ramp up your contributions even more. But you can rest assured that you're in a great place. And if you continue doing what you're doing, there's a really strong chance that come retirement, you'll have more than enough money to enjoy the comfortable lifestyle you deserve.

Our Research Expert

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