If you’re not interested in saving for retirement because it’s still decades away or you assume that saving intermittently is good enough, you’re in for a huge awakening. Savvy professionals start making contributions from their paychecks to their retirement accounts at the beginning of their careers. If you failed to do it this way, now is the time to start catching up.
The average American spends 20 years in retirement, according to the U.S. Department of Labor. The choices you make now will determine whether you get to relax during those years or if you’ll be forced to make ends meet. Here are nine signs that your current retirement savings strategy isn’t going to cut it.
1. You haven’t started saving
If you think you should start saving for retirement when you’re 50 years old, you’re sorely mistaken. The earlier you begin contributing to a retirement account, the more money you’ll have to last you through your golden years.
Fidelity estimates that your total retirement savings should be 8X your final salary. To achieve this, work toward saving 1X your salary by age 35, 3X by age 45 and 5X by age 55. It might seem daunting at first, but the combination of regular contributions and compound interest can help your funds grow to a healthy sum.
Related: 28 Retirement Mistakes People Make
2. Paying out-of-pocket medical expenses is a struggle
As a young and relatively healthy person, you probably don’t incur too many pricey medical bills. If you’re having a hard time finding the money to pay the small bills you have now, you might have an equally hard (or harder) time paying medical expenses as you get older.
According to a 2014 retiree health care cost estimate from Fidelity Benefits Consulting, a 65-year-old couple retiring last year needed an average of $220,000 to pay for medical expenses in retirement. It’s important to note this estimate did not include nursing home costs and was only applicable to those with traditional Medicare insurance coverage.
Start saving money now — you don’t want to have to worry about not being able to pay hospital bills in the unfortunate event that you get sick or injured.
3. You have credit card debt
Whether you’re maxing out your credit cards or trying to get out of debt, there’s a good chance you’re not focused on retirement saving. Examine your spending habits and create a budget to start living within your means. Then, devise a plan to start paying off debt and saving for retirement.
In some cases, it might make sense to focus on saving money for retirement first. For example, Debt.org advises saving for retirement before paying off debts if you’re nearing retirement age, if your debt is reasonably small or if your employer offers to match your 401(k) contributions.
4. You’re spending too much of your income
As a general rule, you should be saving 10 to 15 percent of your income for retirement, according to financial services company TIAA-CREF. Divide the rest of your take-home pay between an emergency fund and other expenses you’re planning to incur in the future. The earlier you get used to setting 10 to 15 percent of your income aside, the easier it will be to do so.
5. You have no idea how much money you’ll need to retire
If you don’t know how much money you’ll need to maintain your current lifestyle in retirement, you’re most likely not saving enough. Not only do you need enough to pay for your living expenses, travel and everything else you’re planning to do during retirement, but you’ll also need to account for inflation. Setting a retirement savings goal and sticking to it can prevent you from working the rest of your life.
Read: Here’s How Much Money You Really Need to Retire
6. You’re not getting the full match from your employer’s 401(k) match
If your company offers to match a portion or a percentage of your 401(k) contributions, contribute enough money to get the full employer match. It’s a quick and easy way to grow your retirement fund and essentially earn free money. Take advantage of this program if your employer offers it. Otherwise, you’ll regret passing up this opportunity if you find yourself struggling to pay for an expense during retirement.
7. You’re relying only on Social Security
Sure, a portion of your paycheck goes to Social Security, but the future of this fund looks a little bleak. The trust funds are projected to run out in 2033. If that happens, the program is expected to only “pay around 77 percent of its scheduled benefits,” reports Daily Finance.
Regardless, Social Security benefits represent about 38 percent of the income of the elderly, with the average monthly benefit for retired workers at $1,294, according to 2014 data. So, consider Social Security a benefit that’s nice to have in retirement — not something you can count on.
8. You can’t live off of your current savings for a few months
If you don’t currently have enough money saved to last you a few months in case of an emergency or if you lose your job, how do you think you’re going to survive 20 or so years in retirement? Rather than becoming discouraged, use this as a wake-up call to get your financial priorities in order so you can start focusing on your future.
9. You’ve borrowed from your 401(k)
It doesn’t matter how much money you have put aside in your retirement savings account if you’ve already taken a good amount of money out of it. Although this early withdrawal might have helped you in the short term, it can be detrimental to your long-term financial health in retirement. You’ll need to develop an aggressive savings strategy to try and get caught up again.
Read: How to Become a Millionaire Using Just Your 401(k)
If all nine of these signs apply to you, don’t freak out — just start planning and saving today. Saving sooner rather than later is preferred, but saving later rather than never is always the best route to take.
This article originally appeared on GOBankingRates.com: 9 Signs You’re Not Saving Enough for Retirement
This article by Laura Woods first appeared on GoBankingRates.com and was distributed by the Personal Finance Syndication Network.
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