Are You Saving Enough?
It's America Saves Week. Here's how to make sure you're on track to reach your goals
Are you saving enough? Only about half of Americans say that they are, according to a survey released February 25, the first day of America Saves Week.
The survey was commissioned by America Saves, which was founded by the Consumer Federation of America, and the American Savings Education Council, which was founded by the Employee Benefit Research Institute. Although two-thirds of the respondents said they have sufficient emergency savings for unexpected expenses, only 49% of the non-retired respondents said they were saving enough for a retirement with a desirable standard of living. Only about half of the respondents said they have a savings plan with specific goals; 43% said they had a savings plan that allowed them to save enough to achieve their goals.
"They know they need to save more," said Dallas Salisbury, chairman of ASEC and president and CEO of EBRI, in a press release. The goal of America Saves Week is to promote good savings behavior. More than 1,300 local, state and national organizations participate in the annual event to encourage people to start saving -- or saving more.
If you need help improving your savings habits, here are several tips from Kiplinger's:
Save or pay off debt? If you have high-interest credit card debt, you should focus on paying that off because the returns would be greater than what you'd get with most investments. However, you can tweak your approach a little if your employer offers a 401(k) plan and will match your contributions up to a certain level. In that case, make your top priority saving enough in your 401(k) to capture the match -- even if you have credit card debt -- because you're getting a 100% return on your investment. Contribute more than the match level once you've paid off your consumer debt.
You also shouldn't sacrifice saving for retirement to accelerate mortgage payments. For the most part, it's usually not a good idea to pay off your home mortgage early unless you have a lot of extra cash. Besides, without a mortgage you'll lose the valuable mortgage-interest deduction on your tax return, assuming you itemize your deductions. However, aim to pay off your mortgage (and any other debt you might have) by the time you retire so you can get by on less money.
Build an emergency fund. About one-third of Americans don't haven't set aside cash for emergencies, as a result, don’t have sufficient savings to pay for unexpected expenses, according to a survey by the Consumer Federation of America and American Savings Education Council. If you don’t have an emergency fund and are hit by an unforeseen event, you’ll be forced to rely on credit cards, take out a loan or tap your retirement account. This could leave you drowning in debt or without enough money to fund your retirement. Here are seven ways to find enough money to build an emergency fund. For interest-bearing accounts that offer easy access to your money (as well as investments for longer-term savings) see Where to Stash Your Cash Now.
Boost your retirement savings. To find out whether you're saving enough for retirement, take our quiz and use our tool to find out how much you need to retire. Then see our How to Retire Rich Guide, which provides steps you should take at various ages to build a nest egg. And follow these seven steps to boost your 401(k).
Save for your retirement or for your kids' college education? If you're not on track to reach your retirement savings goals, focus on building your nest egg before saving for a child's college education. After all, you can't take out a loan for retirement but you can get financial aid for college. However, if your retirement savings are in good shape, see Smart Ways to Save for College to find out which option is best for your family.