NEW YORK (MainStreet) -- Studies show that Americans are falling further behind on their retirement savings, so much so that a new Wells Fargo (Stock Quote: WFC) study suggests American workers consider 80 to be the new 65.
The study is chock-full of high-alert conclusions from Wells Fargo, which offers the following fresh statistics on American workers’ attitudes about retirement:
- A quarter (25%) of middle-class Americans say they will “need to work until at least age 80” to live comfortably in retirement.
- Three-fourths (74%) of middle-class Americans expect to work in their retirement years. Of that group, 39% say they will need to work to make ends meet or maintain their lifestyles, while 35% say they will work because they want to, rather than out of financial need.
- Among middle-class Americans ages 40 to 59, 54% say they will “need to work,” compared to 34% of those age 25 to 39. Accordingly, only 25% of those between the ages of 40 and 59 say they will work in retirement because they “want to,” versus 45% of Americans between the ages of 25 and 39.
But all is not lost: Even if you have slipped up and lost ground on your retirement savings, there are a few tactics you can use to get back into the game. In fact, these tips alone can turn your retirement future from bleak to bearable, if not bountiful, in only a few years. Let’s have a look:
Leverage your 401(k) plan. In 2011, American workers can contribute up to $16,500 in their company’s 401(k) plan. If you’re 50 or older, you can add an additional $5,500 in "catch-up” 401(k) plan contributions. If you’re a sole proprietor, the news gets even better: You can contribute the $16,500, plus 25% of your compensation up to $49,000 in 2011.
Take advantage of low mortgage rates – and refinance. According to the BankingMyWay Weekly Mortgage Rate tracker, 30-year fixed-rate mortgages are at historic lows. That’s a big opportunity, and a key to catching up on your retirement savings. If you have decent home equity, you can refinance your home mortgage, get the lower rate and take money saved and invest it in the stock market. Talk to a good financial adviser before you invest the money.
Go for a Roth IRA. Most Americans can contribute to a Roth individual retirement account on top of their contributions to their 401(k) or 403(b) plans. Sure, the contribution isn’t tax deductible, but the assets you earn from the IRA are tax-free in retirement. That’s not a bad deal, considering that you can contribute $5,000 or $6,000 if you’re older than 50. Consider a $4,000 investment: Given a 7% rate of return, you’ll earn $208,000 at the end of 21 years. Better yet, you’ll owe no taxes on the cash.
Get rid of debt. Not everyone ties debt to wealth accumulation, but they should. A huge balance on your credit card can cost you thousands of dollars in incurred interest rates – money you could be using to beef up your retirement earnings. If you’re only paying the minimum debt on your credit card bill, ramp things up and pay down as much as you can. It will take some cutting back financially, but being debt-free is one of the best feelings in the world. Plus, you can use the money saved for your retirement catch-up plan.
Don’t kick yourself over your retirement shortfall. Sure, it’s a tough spot, but millions of Americans are right there with you. Take the tips above and apply them ASAP, and see how fast you can recover ground in your retirement planning campaign.
If you're heading toward retirement age but are thinking about a second career, here are five jobs that match the skills and lifestyle of older Americans.