Just in time to celebrate National Save for Retirement Week, my good friends over at Personal Capital put together a little study of how ‘ready’ our retirement savings might be compared to our age. Since I’m not only a fan of Personal Capital, but also a user, I find this data fascinating and I was a part of the aggregate data. To be fair and honest here, I know my retirement savings are not up to where they should be. The main reason for this is because I’m playing serious catch up from the four years I spent digging out of a debt hole the size of a couple of cars, a house, a Jetski, and too many credit cards to list. That debt whole has shrunk quite a bit since those credit cards were paid off.
When I first started paying off debt, I didn’t focus on saving money. That changed pretty quickly once I realized I could do both. While the saving wasn’t as big at first, over time it grew larger than the debt payments. This was the method I used to save and pay off debt at the same time. It worked for me and a number of people I’ve met. Once I switched my focus and started shoveling money into my retirement savings, I realized I was going to be doing much better. Unfortunately, I also have to play catch up for all the years I lost with compound interest. You know, the real factor in savings!
Anyway, Personal Capital put together a little infographic and interactive map to help you see where you might be compared to others in your state. It also breaks down each state in relation to each other. The results may be surprising!
Your Retirement Readiness
Before we move onto the graphics and fun factoids, we need to look into how we should be getting ready for retirement. The number you need is going to be different for each and every person. The old, standard of $1 million is probably not very accurate any longer. My suggestion is you should actually sign up for a free Personal Capital account, then use their retirement planner. It is one of the best I’ve ever seen. It takes into account so many variables and ones you can include on your own depending on your lifestyle and income variances. Very few retirement calculators have shown such promise.
If you’re new to the retirement savings game, then you need to get in on it right now. Stop making savings excuses and jump on the retirement bandwagon. You won’t regret it later down the road. Here are some tips and places you could get started.
Check with Your Employer
If you have a full-time job that carries benefits, make sure you are enrolled in your employer’s 401(k) plan. Not all employers have such plans, but check with the HR department to see if they are. If you’re already enrolled in the 401(k) program, then make sure you are taking advantage of whatever match you might be getting as a benefit. Often employers will match their employee’s contributions up to a certain percent. I know for myself, my employer would match 50% up to 3% of my wages. I’ve seen other employers offering 100% match up to 5%. It really depends on the employer, but never, and I mean never, leave money on the table. Been there and done that!
No 401(k), Open a Roth IRA
My parents pushed and pushed me for years to open up a Roth IRA. I didn’t think anything of it because I had a 401(k) to get me ready for retirement. Boy was I wrong and I’m glad I have one now. I set up my Roth IRA with Betterment, a company I use and really enjoy. I even got my sister to sign up for the service. They make investing so easy that anyone can do it. No matter who you go with, just open a Roth. You can contribute up to $5,500 each year (this does change) and since you’re already taxed on it, you won’t get taxed again. You can even pull out contributions if/when you need them because you’ve already been taxed. There are some rules on this, so make sure you check out the IRS guidelines.
Self-Employed? Think about These Options
Since there are many who are self-employed out there, a 401(k) might not be possible. Yes, you can have a Roth IRA as well, but the contribution limits can be hard to deal with. You won’t be able to retire only contributing $5,500 a year. Since I own a business, I decided to open up a SEP IRA and did that through Vanguard. It was easy to set up and it helps me keep more money in my pocket at the end of the year due to how taxes are calculated. You can also do an Individual 401(k) or a SIMPLE IRA.
I would recommend speaking with a qualified small business accountant or tax attorney to see if one of these options will fit you and your business. Each one has pros and cons, so I wouldn’t be able to give you any insight into which plan might be the best fit.
Where Should I Invest?
If you’ve never invested before and don’t know the first thing about it, then take some time to read up on investing. Google to your heart’s content as you should know a little before you jump in. Remember, investing is not guaranteed. You can lose money when investing, but if you are smart about it and diversify, then you can make money.
There are a number of places you can invest your money. I have accounts at Vanguard, Motif Investing, Betterment, and Scottrade. I’ve also tested out TradeKing, E*Trade, and a few other robo-advisors out there. The right place for you will be different than mine. I suggest you look over our online brokerage listings to see if any of them fit the bill. You can also Google “online brokerages” to see what comes up. There are many of them, don’t be overwhelmed. Make sure to look over their fee structure for trading and how much it costs to get started. Robo-advisors (like Betterment) have a lower initial investment than firms like Vanguard and Fidelity.
The Findings of the Retirement Readiness Study
I was actually a little surprised at these findings. It shows that the East Coast is more prepared than any other part of the US. California is not doing so hot, but not nearly as bad as the Midwest. No matter where you live, the key takeaway here it to make sure you start preparing for retirement at any age. It’s always better to plan and save for retirement when you’re young, but no day is too late. If you haven’t started saving yet, START RIGHT NOW!
As Personal Capital looked over the data, they found those who actually used their free retirement planner and came up with a plan, had 75% higher retirement savings balances than those who didn’t. This is not to toot their horn, this is to show what proactive planning does for you. Those who plan to save and plan for retirement have more saved up than those who don’t. Just remember that when you’re looking through your retirement plan and wondered where you might have gone wrong.
Here is the data put together in a nice infographic. Below the infographic, you can view the map and click on it to go to the interactive version. You can also click here if you don’t want to look at the graphics.
If you click on the map below, it will take you to Personal Capital’s site where you can actually interact with the map and hover over each state to see where you might stack up. The darker states have more savings.
Not Sure How to Start Investing?
I opened up my first investment account back in 2012 after paying off a lot of debt. That account was with Betterment. Since then, I haven’t looked back. I love the simplicity and ease of use they provide. I think their system is good for any type of investor. If you want to get into investing, check out Betterment.