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By some measures, retirement savers, overall, are doing well.
As of the second quarter of 2024, 401(k) and individual retirement account balances notched the third-highest averages on record, helped by better savings behaviors and positive market conditions, according to the latest data from Fidelity Investments, the nation’s largest provider of 401(k) savings plans.
The number of 401(k) millionaires also hit a new all-time high.
The average 401(k) contribution rate, including employer and employee contributions, now stands at 14.2%, just below Fidelity’s suggested savings rate of 15%.
Yet there is still a gap between what savers are putting away and what they think they should have once they stop working.
Overall, 35% of Americans believe they will need more than $1 million to retire and live comfortably, according to a new report by Bankrate.com. Another 10% think they need $750,001 to $1 million.
Although most workers have a specific retirement goal in mind, only 49% believe it is likely they will be able to meet their target and 48% say it is unlikely they will save the amount they need, the report also found. Bankrate polled 2,445 adults in mid-August.
40% of workers are behind on retirement planning
In fact, 40% say they are behind on retirement planning and savings, largely due to debt, insufficient income or getting a late start, according to a recent CNBC survey, which polled more than 6,600 U.S. adults in early August.
Older generations closer to retirement age are more likely to regret not saving for retirement early enough, the CNBC survey found. More than a third (37%) of baby boomers between ages 60 and 78 said they felt behind, compared with 26% of Gen Xers, 13% of millennials, and only 5% of Gen Zers over the age of 18.
“There are so many individuals, young, mid-career and deep into their career, that are not saving enough for a healthy and secure retirement,” Jacqueline Reeves, the director of retirement plan services at Bryn Mawr Capital Management, recently told CNBC.
More than any other money misstep, not saving for retirement early enough is the biggest financial regret for 22% of Americans, according to another recent report by Bankrate.
“If you do less at 30, you’ll still have more at 60 than if you did more at 50,” Reeves said.
The retirement savings gap
Other reports show that a retirement savings shortfall is weighing heavily on Americans, especially as they approach retirement age.
An August LiveCareer survey found that 82% of workers have considered delaying their retirement due to financial reasons, while 92% fear they may need to work longer than originally planned.
Roughly half of Americans worry that they’ll run out of money when they’re no longer earning a paycheck — and 70% of retirees wish they had started saving earlier, according to another study by Pew Charitable Trusts from January.
Among middle-class households, only 1 in 5 are very confident they will be able to fully retire with a comfortable lifestyle, according to a recent Retirement Outlook of the American Middle Class report by Transamerica Center for Retirement Studies, which broadly defined the middle class as those with an annual household income between $50,000 and $199,999.
“America’s middle class is navigating the turbulent post-pandemic economy and high rates of inflation,” said Catherine Collinson, CEO and president of Transamerica Institute. “They are focused on their health and financial well-being, but many are at risk of not achieving a financially secure retirement.”
How to overcome a savings shortfall
Many of the workers who feel behind on their savings are still years, if not decades, away from retirement, explained Bankrate’s senior economic analyst Mark Hamrick.
“Those who strive to prioritize retirement savings, as they should, have reason to believe they can achieve their goal,” Hamrick said. “It takes information, focus and hard work, but the good news is that it can be done.”
In addition to making automatic contributions into a retirement savings plan, experts often recommend opting in to an auto-escalation feature, if your company offers it, which will automatically boost your savings rate by 1% or 2% each year up to a set cap.
Savers closer to retirement can even turbocharge their nest egg.
Currently, “catch-up contributions” allow savers 50 and older to funnel an extra $7,500 into 401(k) plans and other retirement plans for 2024, beyond this year’s $23,000 employee deferral limit. The catch-up contributions for IRAs is an additional $1,000 on top of the $7,000 limit for 2024.
Most experts also recommend meeting with a financial advisor to shore up a long-term plan. There’s also free help available through the National Foundation for Credit Counseling.