They don’t call them the golden years for nothing — American consumers spend much of their lives working toward retirement, so many have probably thought about their ideal retirement and how to make it happen.
MagnifyMoney researchers set out to identify what a dream retirement looks like for folks, but plenty of personal and societal factors could be impeding those dreams. Researchers found a large share of the 2,050 consumers surveyed expects to retire in debt. Plus, many folks are afraid that Social Security benefits will run out, or that they’ll face a medical crisis that upends their retirement plans.
Whether they’re focused on retiring as soon as possible, or at a more common age but on a beach, consumers have big retirement dreams. Some may have to plan more carefully to avoid a retirement nightmare.
Key findings
- 46% of Americans think they’ll retire in debt. At the same time, 54% have no plans to work with a financial planner or retirement specialist on their retirement goals.
- Nearly 30% of millennials and Gen Zers want to retire before they turn 50. Plus, more women want to retire before 50 than men (21% versus 15%, respectively).
- 43% of Americans fear their retirement dreams could be derailed due to Social Security running out. In addition, 22% worry about losing their savings in a stock market crash.
- 48% of Americans think they can retire with less than $1 million saved. That said, just 31% of Americans want to stop working entirely after retirement, allowing for a lower initial savings balance.
- Florida, California and Texas top Americans’ list of their dream retirement destinations. For those who’d rather head to another country, Costa Rica, Canada and New Zealand were the top choices.
Debt puts a drag on retirement dreams
American consumers have big dreams and goals for their retirement, whether leaving the country or simply owning their home. Yet, 46% think they’ll still have debt by the time they retire.
Despite that expectation of debt, just 20% of folks expect to work in their current field or a new field during retirement. While some people will have income other than a salary, retiring with debt on a fixed income may leave some retirees struggling to make ends meet, much less living out the retirement of their dreams.
Still, only 21% of consumers report working with a financial planner or retirement specialist — the majority of folks (54%) have no plans to seek expert help to meet their retirement goals.
In general, though, MagnifyMoney senior content director Ismat Mangla encourages people to figure out a budget that addresses saving for retirement and paying off debt.
“Don’t sacrifice saving and investing for retirement until you’re debt-free because then you’ll lose the power of compounding over time,” she says.
Younger generations racing to retirement
For some consumers, a dream retirement is the one that starts the soonest. The most popular (25%) age range when respondents would ideally retire is 60 to 64, but younger generations may be more interested in early retirement.
Though they’ve presumably spent less time in the workforce than older generations, 27% of Gen Zers (ages 18 to 24) and 28% of millennials (ages 25 to 40) want to retire before they turn 50. And while some Gen Xers (ages 41 to 55) may be past that threshold, 16% say their dream retirement age is below 50. But considering only 10% of retired Gen Xers say they’re living their dream retirement, perhaps they wish they’d left the workforce earlier.
Similarly, 7% of baby boomers (ages 56 to 75) say their dream retirement age is less than 55, but a larger share of retired boomers — 18% — say they are living their dream.
Women are more likely to dream about early retirement, with 21% of women ideally retiring before age 50, versus 15% of men.
Insecurity about Social Security common among hopeful retirees
Even the humblest of retirement dreams may require some cost-of-living adjustments, but how retirees financially support themselves can vary. It appears a large share of folks are depending on Social Security income to partially or totally fund their retired life, as 43% of folks fear their retirement dreams could be derailed if Social Security runs out.
“It’s important to not rely only on Social Security for your retirement income,” Mangla warns. “Think of it as a supplement, based on how much you have paid into the system.”
Many folks have concerns about their other investments, too, with 22% of consumers worried they’ll lose their retirement savings in a stock market crash. But the most popular concern for retirement hopefuls may not be completely financial — 46% of respondents fear an unexpected health issue could impede their retirement plans.
While a major medical issue could wind up costing enough money to drain retirement savings, it’s feasible that some of those who fear health problems are more concerned with the physical limitations they could put on retirement plans.
Retiring on 6 figures
Regardless of their dream retirement, just over half of consumers think they’ll need $1 million or more to retire. In contrast, 48% of folks think they can retire with less than $1 million in savings.
Estimating how much money you’ll need to retire will depend on the kind of retirement lifestyle you want and how much time you have to save. There’s no single dollar amount that will allow every American to retire comfortably, but 55% of consumers would ideally just relax in retirement and probably not have to worry about affording bills or other necessities.
Other popular dreams include traveling (50%) and spending time with family (52%), which typically mean having a lot of free time. Still, only 31% of respondents say they want to stop working completely in retirement, so it’s possible folks will look to earn an active income at a smaller scale than during their primary working years.
Retirement dreamers set their sights on warm destinations
Though most Americans aim to stay in the U.S. to retire, 13% of folks would like to spend their golden years in another country. When it comes to priorities surrounding their retirement location choices, consumers mostly focus on the lifestyle they want (52%) but are nearly equally concerned with the cost of living (51%) and climate (50%).
As such, it makes sense that so many consumers (15% of folks who want to stay domestic) want to retire in Florida — it’s a state known for its warm climate, low cost of living and leisure activities for retirees and younger families alike. A recent MagnifyMoney study ranked the states by estimated annual costs of living in retirement, placing Florida 22nd.
Meanwhile, California comes with a high cost of living for workers and retirees alike — still, 11% of consumers staying in the country say they’d like to retire in the Golden State, perhaps more focused on the lifestyle and climate advantages. The beach was the most popular (34%) type of location respondents chose for their dream retirement, so California would support that desire as well.
Those looking to retire outside the U.S. mostly select countries with a major benefit — universal health care. Costa Rica tops the list as the most popular international dream retirement location (with 7% of those who want to leave the U.S.). A relatively low cost of living and tropical climate may also make Costa Rica attractive to retirees.
Canada and New Zealand follow, with 6% of hopeful international retirees looking at each option. Consumers also commonly named the following countries as dream retirement destinations:
- Japan
- Italy
- Ireland
- United Kingdom
- Greece
- Belize
- France
- Denmark
- The Bahamas
- Australia
Make your retirement dreams a reality
Whatever your dream retirement looks like, you need to have a plan to get there — or achieve any level of retirement for that matter. Nearly a quarter (24%) of Americans feel they won’t reach their dream retirement goals.
Younger generations, however, are more optimistic: 47% of millennials and 53% of Gen Zers believe they’ll see their retirement dreams realized. Lucky for them, they have the most time to make it happen.
Using these other tips can help anyone work towards a dreamlike retirement:
- Set a clear and attainable goal. Different retirement priorities require different lifestyle choices, so whatever a perfect retirement looks like for you, make sure you’re equipped and ready to do what it takes to get there. Retiring early, for example, usually requires a super-frugal lifestyle and strict budgeting, which Mangla says doesn’t work for everyone. “Sit down and do a clear accounting of your finances and your goals to figure out how much you need to save and invest in order to hit your retirement target,” she says. “Make sure you can handle the lifestyle that requires you to get there.”
- Start saving early and often. As mentioned earlier, some folks may feel like they should focus on clearing out debt rather than saving for retirement, but time is a valuable asset many simply can’t afford to lose. Aggressive savings moves like maxing out your 401(k) might not work for folks who have more pressing financial matters. But even small contributions can make a difference with time to compound interest.
- Use time to your advantage. Retiring early may come with some advantages, like spending more time doing what you want, but certain retirement benefits get better with age. A recent MagnifyMoney survey found adults who retire at age 62 versus age 70, when they become eligible for maximum Social Security benefits, could be losing around $1,200 a month.
Everyone has different retirement priorities, but know that there’s no rush to get to your golden years — and there are advantages to waiting. A carefully planned retirement best-timed for your personal situation should be the dream for anyone.
Methodology
MagnifyMoney commissioned Qualtrics to conduct an online survey of 2,050 U.S. consumers from Sept. 23 to Sept. 30, 2021. The survey was administered using a nonprobability-based sample, and quotas were used to ensure the sample base represented the overall population. All responses were reviewed by researchers for quality control.
We defined generations as the following ages in 2021:
- Generation Z: 18 to 24
- Millennial: 25 to 40
- Generation X: 41 to 55
- Baby boomer: 56 to 75
While the survey also included consumers from the silent generation (those 76 and older), the sample size was too small to include findings related to that group in the generational breakdowns.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.
This article originally appeared on MagnifyMoney.com and was syndicated by MediaFeed.org.
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32 ways to boost your retirement savings
Saving for retirement is one of the most important financial goals there is, but it isn’t always easy. Even with the best intentions, it can be difficult to discipline yourself to put money away for a nebulous “someday,” especially when you’re busy trying to make ends meet now.
But there are plenty of ways to save for retirement more efficiently, making every dollar go a little bit further toward a well-deserved rest in your golden years.
A lot of the “getting started” part is becoming educated on how different retirement plans work and what your options might be depending on your financial situation.
Related: A guide to the 403(b) retirement plan
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If your company offers a 401(k), it’s usually a good idea to contribute to it, at least a little bit. The contributions will be automatically deducted from your paycheck and may also be made from pre-tax money, which will lower your taxable income.
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If your employer offers a 401(k) match, there is even more incentive to contribute. A match is about as close as it comes to free money and is considered part of an employee benefits package. Your company may have a vesting schedule, meaning you don’t obtain full ownership of its contributions until you’ve been working at the company for a certain amount of time. You’ll always maintain full ownership over the money your contributions, however.
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Thanks to the power of compound interest, the earlier you start saving for retirement, the more you’ll likely make over time. It’s never too early to start—so get cracking!
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Making regular contributions is one of the best ways to grow your retirement funds. With a company-sponsored retirement fund like a 401(k), the money comes out of your paycheck each period. But if you’re DIYing your retirement with an IRA, for instance, you’re in charge of making sure money’s going in.
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Even if you are actively investing in a 401(k), you may be able to boost your retirement savings even more by also opening an IRA. If you’re self-employed or working at a job that doesn’t offer retirement benefits, an IRA might be the very best choice available for you. IRAs are easy to open and available to almost anyone, so long as you earn an income.
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The contribution maximum for IRAs is relatively low, compared to 401(k): For 2021, you can contribute up to $6,000 per year to your IRA, or $7,000 if you’re aged 50 or over and eligible for catch-up contributions. Maxing out your IRA each year can help set the foundation for a successful retirement and also help you save money on taxes during the year the funds are contributed if you’re eligible.
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A Roth IRA works a little differently than traditional IRAs and 401(k)s. Rather than getting a tax break now, you’ll get it later when you take the funds out during your retirement years. If you’re eligible for a Roth account, you may be able to have some tax-free income in retirement.
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If you earn more than $125,000 as a single person or $198,000 as a couple (for 2021), your eligibility to contribute to a Roth is reduced—and if you earn much more than that, you may be ineligible entirely. However, you can still transfer the funds in a traditional IRA into a Roth account, provided you pay income taxes when you do so. This can help you score those tax-free earnings, even if you earn too much to directly contribute.
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Contributing to your 401(k)—or any retirement account—is just the start. In order to get that money growing, you need to make sure it’s allocated into investment categories like stocks, bonds, and cash. How your investments are allocated is likely to change over time, depending on your risk tolerance and the length of time before you plan to retire.
(If you have specific investment questions, we always recommend chatting with a qualified financial planner or other investing professional.)
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Allocation and diversification go together like peanut butter and jelly. Maintaining a diverse portfolio helps you avoid having all of your investment eggs in one basket. If one company—or even one segment of the market—starts to falter, you have other investments to fall back on.
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Even if you’re diligent in looking at how to maximize your retirement savings, maintenance and trading fees can quickly eat into your funds—and these fees do vary depending on what financial institution manages your account. It’s worth shopping around for an account that has reasonable 401(k) fees.
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An HSA, or Health Savings Account, isn’t a retirement vehicle in its own right, but it can help you boost your retirement savings if it is treated as a retirement account. To qualify for an HSA, you must have a High Deductible Health Plan, among other requirements.
HSAs are portable, so you can take them with you if you change employers or retire. Distributions taken for qualified medical expenses are tax-free, but non-medical distributions are taxable and may be subject to an additional 20% penalty.
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These days, few people stay at the same job for their whole careers. If you’ve been accruing retirement savings in a 401(k), it could be tempting to cash it out and treat it as a windfall when you change employers. But early withdrawal comes with a 10% penalty tax from the IRS, not to mention the regular income taxes you’ll have to pay on the money. It’s probably a way better idea to roll it into a new 401(k) or IRA and keep it growing.
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After you’ve taken the steps to start saving for retirement and have a solid plan in place, it’s a good idea to make sure you are contributing as much as you can during your prime working years.
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This one might cause a little stress, but it can pay off with an income increase just with a single conversation. Gather the specifics about why you’re an awesome employee and put on your negotiating hat. If you’re feeling bold, you might also ask for a retirement-specific benefit as part of the deliberations, like an increased 401(k) match!
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Budgeting is the key to so many personal finance matters, and saving for retirement is no different. By seeing where the money is coming in and going out, you might find some places to cut back and find more money to stash away for the future. If you haven’t spent some time with your budget in a while, sit down and get to know it.
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The amount you’re able to set aside for retirement will depend on your current earnings, cost of living, and many other factors. While an oft-cited rule of thumb suggests saving 15% of your income, that may not be feasible for you. However, it’s still worthwhile to sit down and set a specific monthly retirement savings goal and commit to putting that much away. Focusing on how to increase your savings rate when your income or other life factors change will likely keep your retirement goals in sight.
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When you’re budgeting your income and expenses, it can be easy to leave savings as the last line item. By committing to saving first (setting money aside as soon as you get it), you’ll ensure you’re actually contributing to your retirement fund on a regular basis, helping it continue to grow as effectively as possible over time.
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One easy way to ensure you don’t fall behind: Automate your retirement savings. Most brokerages and platforms have an option to allow you to automatically invest a certain amount on a regular basis. Again, just be sure you’re actually allocating the funds once they hit your account.
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We’ve all got to eat—which means we all spend money on food. But how much money we spend is another matter entirely. According to the latest data from the USDA, a household of two might spend as little as $410.60 on a month’s worth of groceries or as much as $815.60—a wide range. There are plenty of suggestions online for saving money on a grocery budget, so paying attention to expenditures here and getting creative with meals will probably net some savings to add to a retirement account.
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You can only make so many budget cuts, but you can almost always find ways to make extra money. Whether it’s freelance writing or selling your crafts on Etsy, a side-hustle might be a great way to increase the amount of cash you have on hand to put toward retirement.
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Regular interest-bearing checking and savings accounts are still out there. Even though the interest earned might be minimal compared to investment accounts, it’s still better than not earning interest on those accounts at all.
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If you’re getting a tax return, it may be tempting to spend the money on fun things, but when calculating how to maximize your retirement savings, it’s worth considering funneling some or all of it into your investment account. Saving instead of spending this money could add up to major nest egg increases.
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Aside from housing, car ownership can be one of the most expensive parts of day-to-day living for many people. It’s not just the cost of the vehicle itself, but also insurance, maintenance, and fuel. If you live in the kind of city where you could rely on public transit or take your bike to work, doing so might be a great way to make some substantial monthly savings.
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Assessing your true housing needs is likely a major decision within a household, but if you live in a house that’s bigger than you need or in a pricey part of town, for example, it could be worth it to look at alternatives. Paying less monthly rent, lower taxes, or even saving on transportation costs by moving closer to work could lead to substantial savings each month and help maximize your retirement savings.
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Renting can be a good option for certain needs, lifestyles, or periods of your life. But homeowners do tend to accrue more wealth over time. Buying and selling often tends to cost money in closing and moving costs, so if owning a home is something you want to do, buying a home and staying there for a number of years is typically a better way to handle an investment like this.
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While any kind of debt can put an anchor on your retirement goals (and other financial goals, for that matter), credit card debt can be particularly egregious thanks to high-interest rates and compounding, which means you can end up paying interest on the interest you’ve already been charged. By tackling credit card debt, and other high-interest debts, you’ll have the opportunity to save more money to put toward retirement.
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This relates indirectly to boosting your retirement savings, but since paying for a child’s college costs can quickly derail a parent’s retirement plan, thinking about this major expense ahead of time can be a wise financial move.
Many experts suggest making sure you’ve funded your own retirement accounts before you fund education accounts for your children. Each state operates its own 529 plan and the terms vary from state to state. The plans are not tax-deductible on a federal tax return, but a 529 plan can offer some tax advantages on the state level depending on the state.
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Any amount you save for retirement will still be a finite amount, which means it’s important to plan ahead of time how you’ll budget for it. Consider the costs of everything, including food, medical care, housing, transportation, and entertainment. Try to envision ways to keep your cost of living low so each dollar goes further once you get there.
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No matter how much you’re able to save for retirement, the money will go a lot further if you retire somewhere with a lower cost of living. If you have decades before your retirement date, it may be difficult to predict what the cost of living will look like in different places, but start to think about which locations might offer all the lifestyle factors you want while also being affordable.
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Once you reach age 50, the contribution caps on your IRA and 401(k) go up substantially—by $1,000 for IRAs and $6,500 for 401(k)s, in 2021. Maxing out these larger retirement caps can help you increase retirement savings you’ve fallen behind on or rebuild retirement savings you cashed out for something else.
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For many of us, this step might not be coming up anytime soon—but once you’re eligible for Social Security retirement benefits, delaying it might give you a larger monthly benefit during retirement.
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Saving for retirement might be challenging, but it’s not impossible. Stretching every dollar as far as you can will make it a lot more doable.
Like so many other financial goals, it all starts with your budget, and budgeting is a lot easier to do when you have a bird’s-eye view of your finances.
Learn more:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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