Submitted by Treasurer David McRae
“Wherever you are in your retirement planning, use the New Year to reevaluate your contributions.”
About one in four American workers have less than $10,000 stowed away for retirement, according to the 2020 Retirement Confidence Survey. Given that the average American spends about 20 years in retirement, that’s a concerning statistic.
Machen Wealth explains that a lack of savings forces many Americans to work until they are completely unable to, drowns many in debt, and leaves one’s family with financial and emotional stress. So, what can you do about it?
There is no doubt that today’s inflation-driven economy is a difficult environment in which to save. Families are paying more on groceries, gas, and utilities than almost ever before, while wages remain stagnant. Even so, there are a few steps almost anyone can take to help secure their retirement.
First, get an understanding of how much you must put away to live comfortably as you age. The Department of Labor reports, “only half of Americans have calculated how much they need to save for retirement.” That’s something I’m trying to help with. One of my roles as State Treasurer is to assist Mississippians in understanding their finances a little bit better – and planning for retirement is a big part of that. We have built tools on our website to help you set a budget and answer the question: Do I have enough retirement money? To access the tools, visit Treasury.MS.gov/FinancialEducation.
Second, remember you are never too young to save for retirement. If a 25-year-old puts away just $75 per month, they will have accumulated more than $150,000 by age 65, assuming a 6 percent growth rate. Boost those savings to $5,000 per year, and you’ll have over $1 million by retirement. Whatever you can afford, start there and increase as your salary does. Additionally, here’s a pro-tip: Try to automate these savings so you don’t forget to make your monthly contribution!
Third, if you work and your employer offers a 401(k) company match, take it. Contribute as close to the max match as you can afford. It’s free money that shouldn’t be refused.
Fourth, if you are a low- or middle-income taxpayer, know that tax credits may be available for you to deduct a portion of your retirement contributions. Ask a tax professional to see if you qualify.
Finally, if you are nearing retirement age with minimal savings, make sure you take advantage of catch-up contribution benefits. More specifically, if you are over age 50, contribution limits increase, giving you the ability to fast-track your savings.
Wherever you are in your retirement planning, use the New Year to reevaluate your contributions. Even a few extra dollars each month can accumulate and protect your future.
Submitted by Mississippi Treasurer David McRae. He is the 55th Treasurer for the State of Mississippi.