Retirement experts have always guided people to save at least 10 percent of their income to receive nice retirement benefits later on. However, it seems that Americans are not listening to this advice. A survey has revealed that a majority Americans are not able to meet this goal. The solution to such a problem is to increase the savings percentage slowly and steadily over the years.
The Survey on Saving towards Retirement Benefits
The survey that revealed that Americans are not saving 10 percent towards their retirement benefits was conducted by Northern Trust. The survey respondents were people who have 401(k) or a similar retirement account. In a shocking revelation, it was highlighted by the survey that 64 percent of Americans are saving less than 10 percent of their annual income.
Gaobo Pang who serves as the Head of Investor Analytics, Retirement Solutions, for Northern Trust, created a retirement strategies report in which he mentioned that a lot of people aren’t even trying to save more money because they think that it will be of no use. Most of them also believe that if they are saving only 2 percent of their yearly income, it’s not possible for them to take a major leap and save 10 percent.
But there is a solution. Pang also suggested that people should increase their savings rate by a small amount every year. It will ensure that they reach the ten percent goal in a few years. If you are a saver you should increase the savings rate by 0.5 percent every year to achieve the 10 percent goal. Pang says that auto escalation of the savings is a good idea as it sees to the problem of lack of willpower, has long lasting efficacy and offers the least resistance due to its gradual nature.
A Good Idea
It is clear that Pang’s approach towards increasing the retirement benefits is workable as it helps a person achieve the 10 percent savings goal in the seventeenth year. Increasing the savings rate by 0.5 percent is also just given the fact that most people expect 1 percent increase in income on an annual basis. When this method is completely adopted, a person could potentially triple his or her savings by the time he or she reaches retirement as compared to the amount he or she would have saved by sticking to 2 percent of annual savings.