Retirement Savings: Too Little Can Be Too Late

When to start saving for retirement—and how much to save—is a question millions have on their mind. While there is not one right answer for everyone, it appears there are definitively wrong answers to consider. A new report from J.P. Morgan offers a strong case for approaching retirement savings as a bet for the future. “Saving too little toward retirement is like making a bet that you’ll never get sick, stock markets will always go up and politicians will learn to agree. That would be lovely—but it’s not the world we live in. Looked at another way, skimping on retirement savings is akin to hoping you’ll die early.”

Retirement savings: Starting early

Millennials—the generation born between 1980 and 2000—will become, “the largest contributors to the American labor force in 2015 and will soon surpass Baby Boomers as the largest generation, period.” Additionally, the mid-point of the Millennial generation turns 25 this year and it is time for them to get serious about retirement.

Estimates say median-income couples who start saving at 25 for retirement will need to save 15.4% of their income pre-tax in order to comfortably cover possible scenarios like early retirement, Social Security policy changes, unemployment or family emergencies.

This new report, titled The Millennials lays out the argument for aggressive savings by introducing fictional Millennials with different income levels and household structures. “In a story-like series of episodes, readers learn how different events could potentially cause the Millennials to run out of money on, near, or before their 86th birthday—the projected mean life expectancy.”

Small changes, big difference

The different plot lines illustrate how small changes can have a huge impact on retirement down the road. In one scenario, the couple ends up retiring early, which may seem far-fetched for workers today. In fact, 26 percent of workers expect to retire at 70 or older. However, the authors urge readers to remember that the workforce favors the young and it is hard to gauge enthusiasm for anything forty years out.

Overall the report reiterates the value of starting early and saving aggressively—which is far from innovative retirement tips. However, the report also illuminates the value of making small changes now for big benefits down the road. Saving just 3.6 percent—instead of 3 percent—would allow a median-income family to withstand significant financial problems down the road. While the report is illustrative and insightful, it is not comprehensive. If you have questions or concerns about your retirement plan, talk to an expert. Your retirement savings re a personal reflection of your plan, and any solutions should be tailored to your situation.

Our experts at Apex Financial Advisors have years of experience with retirement income projection and planning. We can help develop personalized retirement plan options that start today and benefit you when you need it most in the future. Contact us today before too little becomes too late.

Sharf, Samantha. “Why Saving Too Little For Retirement In Your 20s Is A Bet You’ll Die Young And Broke.” Forbes. Forbes Magazine, 23 Sept. 2015. Web.