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Your Financial Life
By Transamerica / Nov 11, 2015

Saving & Investing For Retirement Post-Great Recession

retirement saving post great recession

Every day, many Americans both inside and outside of the workforce find themselves in one of two situations: paying down their debt or succumbing to it. Following the Great Recession which began over five years ago, times have been hard for a lot of people, no matter what generation you’re in.

If you’re one of the Americans who is financially struggling to save, much less thinking about retirement and investing your money, then you’re not alone. There may not be as much cause for concern as you fear, though. Even if your dollars are already stretched, there are ways to not only save but start preparing for the future as well.

Americans are still struggling financially.

If it seems like you and many of the people you know are all struggling to get back on your feet financially, chances are that you’re right. Even though unemployment is at a seven-year low, people are still fighting just to keep up with their bills.

In the 16th Annual Transamerica Retirement Survey, conducted by nonprofit Transamerica Center for Retirement Studies® (TCRS), more than 4,000 workers from the Baby Boomer (born between 1946-1964), Generation X (1965-1978) and Millennial (1979-1996) generations were surveyed to find out what their savings and retirement plans are following the economic downturn. Results were compared over five years and showed several trends, such as workers’ top financial priorities, and unfortunately it’s not always saving for retirement.

According to the 2015 TCRS survey, one of the top financial priorities of people is “just getting by – covering basic living expenses.” Over the years, fewer workers are citing just getting by as their greatest financial priority; however, it remains the top priority among Millennials, many of whom are working to make ends meet, keep the lights on, and put dinner on the table.

retirement chart 1.1

Depending on the generation, paying off debt and saving for retirement also ranked in the top three greatest financial priorities.

Saving is the first defense against financial hardship.

According to a study by Bankrate, 18 percent of Americans aren’t saving any of their income, and half are only saving around five percent. The recommended savings is closer to 15 percent of a person’s income. Saving so little would leave millions of people in the lurch, should something happen that affects their ability to generate a paycheck.

Many experts recommend that people should have three months of expenses saved up in an emergency savings account, and that’s in addition to what should be contributed to a retirement plan. Unfortunately, many people are not contributing regularly to retirement. According to the 2015 Aegon Retirement Readiness Survey, American workers’ approach to saving for retirement looks like this:

retirement chart 2.1

 

While people may be habitual savers, that doesn’t necessarily mean that they are saving enough to ensure the type of future they desire. Even if you can’t afford to put away 15 percent of each paycheck, something is better than nothing.

However, the problem people occasionally encounter is that they just can’t find a way to make ends meet, save, and invest money. There are lots of opportunities though that can help someone become financially secure. This is where budgeting comes into play.

Steps to take when budgeting.

Budgets. No one likes them, but if you plan on having a financially successful future, they are necessary. In order to achieve your fiscal goals of having an emergency savings fund and planning for retirement, you may need to begin budgeting.

There are some big things you can do to kick your savings into gear, like downsizing. Are you trying to keep up with the Joneses? If so, will you be able to continue keeping up with them when you’re in your 70s? There’s no shame in downsizing, and plenty of people do it. Here are some other potentially big savers:

  • If possible, cut down to having one family car instead of two. This not only saves on car payments and car insurance, but likely gas costs as well.
  • Commit to keeping up your yard and home rather than paying a gardener or housekeeper.
  • Stay in and cook rather than going out to eat.
  • As hard as it may be, cut back on personal luxuries like massages.
  • Not using your gym membership? Give it up and get some fresh air by exercising outdoors.
  • Evaluate all monthly membership costs and see which ones you can live without (e.g. satellite radio, music streaming services, etc.).

Even a few hundred dollars a month devoted to savings and investments can be a game changer.

Sit down and create a list of your expenses. Then decide what is important to spend money on, and where you can cut back to save.

Age affects retirement readiness.

It doesn’t matter if you’re just joining the workforce or are getting ready to leave it, everyone should be looking toward their futures. The TCRS study found that Millennials, Generation Xers, and Baby Boomers were all at different places in terms of how ready they were for retirement.

retirement chart 3.1

Baby Boomers are understandably more likely to be saving for retirement than Generation Xers or Millennials since they are closer to exiting the workforce. However, nearly 20 percent of Baby Boomers are not saving for retirement and may be unprepared for that milestone. Interestingly, even though Millennials are decades away from retirement, more than two-thirds (68 percent) of them are still thinking ahead and taking action to help ensure they have the life they want in their golden years.

How to save and prepare for retirement.

Now that you understand why you should start thinking about allocating some of your funds to retirement, as well as savings, you’ll need to map out some kind of strategy.

Your first stop should be to check out what kind of retirement benefits your employer may offer. If offered by your employer, a 401(k) or 403(b) plan may be a good option. These employer-sponsored retirement savings plans are often a good strategy, especially if your employer matches a percentage of what is being deposited into the plan.

If your company doesn’t offer a plan, or you want something in addition to or other than what they have for their employees, you can look into an Individual Retirement Account (IRA).

 

Of course, there are always annuities and other investments available to you, so if you’re looking to get your retirement funds on the right track, then talk to a financial professional. Every investment has perks and drawbacks, which will likely appeal to you based on your generation. For example, a Baby Boomer who hasn’t prepared for retirement may want something with a monthly payout that comes sooner than a Millennial who still has time to contribute to an account. The important thing to remember is that since there are so many plans out there, you can find one that is right for you. It’s just a matter of weighing your options, establishing a budget, and getting on the road to a secure future.

No matter your age, you can and should think about your retirement. It’s something to look forward to, and planning sooner rather than later will help make sure that’s a reality. Ask your friends and see how they’re investing and if they can recommend a financial professional to help you sort out your options.

The Transamerica Center for Retirement Studies® (TCRS) is a division of Transamerica Institute®, a nonprofit, private foundation. Transamerica Institute® is funded by contributions from Transamerica Life Insurance Company and its affiliates and may receive funds from unaffiliated third parties. For more information about TCRS, please refer to www.transamericacenter.org.

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