Getting Savings Rates On Track: Five Ideas for the New Year
January 05, 2010
Statistics show that most Americans have not saved nearly enough for a comfortable retirement. The start of the new year is a good time to assess your savings program and take some steps to get it more squarely on track.
Retirement Savings Rates
According to the Employee Benefit Research Institute, 40% of all US workers have less than $10,000 in savings and investments. Only 24% report having at least $100,000 set aside. Perhaps even more troubling, older workers don't seem to be much farther along in their savings. Among workers 55 and older, 30% have less than $10,000 saved. Only 41% have accumulated more than $100,000 in savings and investments.
The answer is clear: Americans need to get their savings rates up. While this seems most urgent in the older population, the truth is it can do the most good among younger workers.
Raise Those Savings Rates: Five Ideas
If you are among the majority of Americans whose savings rates have some catching up to do, or even if you feel you are on track so far, there are five practices to consider in the new year to update your savings program:
- Measure your savings vs. your goals. On the whole, US savings rates rose in 2009. Did yours? Most importantly, did your savings reach the goal you set? If you didn't have a goal, that's an important place to start--make sure you have one in place for 2010. If you did have a goal for 2009, hold yourself accountable--did you meet that goal, and if not, why not?
- Revisit your retirement assumptions. Bank rates are low, deflation replaced inflation--temporarily--and the stock market has been on a roller coaster. Overall, it's been an unusual couple of years for deposit accounts and financial markets. Your retirement goals should have inflation and return assumptions built into them, and this is a good time to revisit those assumptions to make sure they are still realistic.
- Check your asset allocation. Savings or money market accounts should be the first place you accumulate savings. As your savings build, you should mix in more growth-oriented vehicles like stocks. In general, the younger you are, the higher your allocation to stocks should be, but you should still use savings or money market accounts for shorter-term needs and emergencies.
- Shop for better bank rates. Some people follow bank rates closely and are always ready to jump on the best deal, but if you take a more laid-back approach, you should still shop around at least once a year to make sure you are getting a competitive rate.
- Look for opportunities to add to income. During the recession, when the unemployment rate was rising rapidly, many people felt that holding onto a job was reward enough. However, as the economy moves out of recession and the job market strengthens, look for opportunities to add to your income. Perhaps test the job market discreetly, and prepare thoroughly for your next pay review.
2009 was better for stocks than 2008, but bank rates were much less rewarding. Perhaps 2010 will be the year savings can do better across the board. Remember that it all starts with how much money you set aside in the first place.
Source:
How Much Have American Workers Saved for Retirement? • • http://www.ebri.org • http://www.ebri.org/pdf/FFE119.16April09.Final.pdf • Employee Benefit Research Institute
