Is your 401k plan losing some luster?

If so, you’re hardly alone.

The Employee Benefits Research Institute estimates about half of all U.S. adults are either “not at all confident” or “not too confident” in their ability to retire comfortably.

The EBRI data say that only 18 percent of Americans are “very confident” about the financial stability of their retirements.

One reason is that U.S. workers have unrealistic expectations about how much money they’ll need to retire and live the life they expect. Some 43 percent say they are targeting saving up to 30 percent of their annual income on a yearly basis, but that would be too low, according to most financial advisers. The expert estimate: Workers will need to save [enough to generate the future equivalent of] about two-thirds of their annual income for a comfortable ride through their golden years.

Another 46 percent of EBRI respondents say they haven’t even bothered to calculate how much money they’ll need for retirement, and only 2 percent of workers rate “saving for retirement” as their most important personal financial goal.

Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial reached out to The 401k Millionaire and sent along some tips on what Americans can do to improve their confidence in retirement, and better manage their 401k plans.

Expect the unexpected. The EBRI findings revealed that Americans are pushing back their retirement dates, but this strategy doesn’t always work out the way they might hope, de Baca says. The fact that nearly half of retirees responded they had retired earlier than planned, and 55 percent of those cited a health problem as the reason they couldn’t continue working, illustrates that too often Americans don’t get to choose when to stop working. Saving early and often with a 401k plan, and anticipating there might be bumps in the road (such as an unplanned early retirement), can make all the difference in planning for retirement.

Focus on health care costs. The EBRI data highlight that 29 percent of workers say they’re not at all confident about paying for medical expenses in retirement. That’s no surprise, considering all the talk about health care in Washington and rising medical expenses weighing on the minds of baby boomers. But understanding such things as what Medicare covers, the costs associated with long-term care assistance and how family medical history may affect future health care costs and decisions are important steps pre-retirees can take.
 

Crunch the numbers. About one in four (23 percent) Americans told EBRI they didn’t know what percentage of their income they should save each year to live comfortably in retirement, de Baca says. “We also found in our own Retirement Check-In survey that 38 percent of pre-retirees (workers age 50 to 70) haven’t even estimated what their expenses may be in retirement,” she says. “Doing the math can be daunting, but beginning to do so might be more simple than what people anticipate.”

As always, becoming a 401k Millionaire is all about proper planning, and solid, regular execution. Follow the guidelines above outlined by de Baca and see if they don’t turbo-boost your 401k program.

Good luck, and good 401k savings – and I’ll see you next week.

Brian O’Connell is an investment analyst at Investing Daily, and the editor of the 401K Millionaire. An ex-Wall Street bond trader, he has appeared as an expert financial commentator on CNN, NPR, Fox News, Bloomberg, CNBC, C-Span, CBS Radio, and many other media broadcast outlets, and is the author of two best-selling books on retirement investing.

 Stock Talk

We encourage you to engage with our analysts and your fellow subscribers on our website. To ask a question or post a comment related to a particular article, please do so in the Stock Talk field at the bottom of that article.

Or to ask a general question, please go to the main Stock Talk page found under the Resources menu for each publication.