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Are you saving enough for retirement? Maybe you’re a smart investor and are therefore more prepared than most.  But recent numbers show a large percentage of Americans don’t fall into that category.

It’s rather disturbing to learn the median amount in a 401(k) savings account is just $18,433, according to recent Employee Benefit Research Institute report. Nearly 40% of employees have less than $10,000, in spite of the fact there are very few companies that still offer defined benefit pensions.

Saving for retirement is often far from the minds of young people especially. If this age bracket isn’t educated properly about its importance, they may maintain that carefree attitude and end up with an insufficient nest egg down the road.

While older workers tend to have healthier savings accounts, they still may be falling short of what will be necessary at retirement. Another recent financial study revealed the median for savers aged 55 to 64 in 2013 was $76,381.

A that level, millions of people nearing retirement are likely to leave the workforce with insufficient savings to cover daily living expenses, let alone the high healthcare costs that will likely arise as they get older.

A 2014 Harris poll found that 74 percent of Americans were worried about having enough income in retirement, and in a survey published recently by the National Institute on Retirement Security, 86 percent of respondents agree that the country is facing a retirement crisis, with that opinion strongest among high earners.

So how many are actually prepared? According a Center for Retirement Research at Boston College report, only about half of U.S. workers have saved a sufficient amount in order to retire comfortably.

Instead of focusing on the negative of that statistic, let’s view the glass as half full. What is this particular percentage of the population  doing right, and how much do you really need to save in order to have a healthy retirement?

Let’s take a look:

—According to the study, individuals should set aside roughly 15 percent of their salaries for a span of 30 years to retire well. By doing this, you will save about 70 percent of your preretirement income, and the rest of your final inflation adjusted earnings will (hopefully) be supplemented by Social Security.

—If you are in your 20s, the situation could be different. You may have a longer period of time to save and be able to contribute a smaller percentage at first. Talk with a financial professional about initially setting aside 10 percent of your pay in an investment account and gradually increase that percentage over time.

Studies have shown that in general, people in the millennial era have proven to be better savers than earlier generations. But even if they are saving, they may not know exactly where and when to invest.

A qualified retirement plan that offers automatic enrollment and deferral-amount increases is a great place to start. Studies reveal more than three-quarters of employers use such defined contribution plans as the main retirement income plan option for employees, and most of them offer matching contribution programs, which further increase employees’ ability to accumulate a healthy nest egg.

For example, a 2011 report by the Government Accountability Office found that “the percentage of workers participating in employer-sponsored plans has peaked at about 50 percent of the private sector workforce for most of the past two decades.”

It’s also important to discuss other investing options with a financial professional, however. He or she can help you map out your retirement goals and figure out exactly how you’ll get there.

Above all, realize any retirement plan is only really as good as your own diligence and discipline in contributing to it, as well as making it last. That means not dipping into it until absolutely necessary.


Author Ron L. Brown, CFP®

Ron is a CERTIFIED FINANCIAL PLANNER™ and President of R.L. Brown Wealth Management. He specializes in retirement, estate, and business planning for professionals and entrepreneurs. Ron assists his clients with creating a financial plan to ensure they are able to live their ideal lifestyle during retirement and leave a strong legacy for their family. Ron has been featured in The Wall Street Journal, US News, Yahoo Finance, Investopedia, and numerous other high profile financial publications.

More posts by Ron L. Brown, CFP®
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