According to a 2011 Retirement Confidence Survey, more than half of participants reported that they and/or their spouse have less than $25,000 in total savings and investments in preparation for retirement. That’s right, a whopping 56% of those surveyed have $25,000 or less saved up for retirement, leaving them with only $152* a month to live off throughout retirement.
Let’s break it down. If the average American relies on basic necessities such as food, clothing, and shelter to survive and the average American’s median monthly housing cost is $808, their moderate monthly food cost is $244, and their average monthly apparel cost is $141, then basic monthly expenses add up to $1,193 — that’s more than 7 times the amount that $152 will allow you to live off each month.
Sure, these calculations don’t take into account the money that people receive through social security. However, not only is the future of Social Security uncertain but even when we include average monthly social security benefits into our calculations, total monthly income only increases to $1,382, leaving you with a mere $189 to spend on dining out, entertainment, transportation, children, grandchildren and any other expenditures. And don’t forget about emergency expenses and unexpected medicals bills!
Don’t get too scared. Saving for retirement can be easier than you thought. Here are 3 tips that can save you a pretty penny down the line:
1. Start Early
There’s no better retirement advice than to start early. Take advantage of your employer’s matching contributions (it’s literally free retirement money). By investing in a 401k, your pretax contributions will grow without being taxed until you eventually retire.
Ever heard the saying “don’t put all your eggs in one basket”? Well it’s no different when it comes to saving for retirement. Ask any economist, finance expert or investment banker and they will tell you that the more diverse your stock portfolio, the safer it is.
3. Have an Emergency Fund
Having an emergency fund will help you avoid dipping into your designated retirement savings if an emergency arises. So in the event that you should lose your job or an unexpected medical expense pops up, you’ll be prepared.
*To calculate this number, we subtracted 65 (average retirement age) from 78.7 (average death age). Then, took that number of years and multiplied it by 12 (number of months in a year). Then, divided $25,000 by that number and arrived at $152 per month.