Even a small difference in the contribution rate can result in a very big difference in account value when it’s time to retire. And beware of taking a loan or hardship withdrawal from your 401(k). In addition to missing out on all the compounding value over time, you could be hit with steep taxes and penalties.
In ING’s study, Hispanics and African Americans had the lowest average 401(k) account balances, with $54,000 and $55,000 saved, respectively, while whites had about $72,000 saved and Asian Americans had $81,000.
Is $54,000 or $55,000 enough to retire? Hardly — consider that you might live 30 years after you stop working. But guess what? Less than 45 percent of all groups in the ING study said they had formally calculated their retirement needs.
If you haven’t yet figured out your retirement needs and started saving for them, there’s no time like the present. Start with Social Security as your baseline, and use our Social Security Benefits Calculator to try out different claiming scenarios.
Then plug your estimated Social Security benefits and other information into our Retirement Calculator. That will help you identify how much more money you’ll need to save to live the lifestyle you envision in retirement.
If you don’t have the luxury of saving that kind of money at present, it’s time to tackle your debt and devise a manageable budget — right now.
AARP members and their families have access to a free calculator that can help figure out which debt to pay off first — the one bearing the highest interest rate or the one with the highest balance. Contact your creditors to ask for a lower interest rate.
If you have debt collectors harassing you for a debt that you don’t recognize, ask them to verify the debt. Under federal law, collectors may not attempt to collect until they’ve given you the requested verification.
Once you have your debt-reduction plan in place, set up a home budget that includes a line item for retirement and emergency savings. AARP has a free home budgeting tool, or you can use something as simple as a computer spreadsheet to add up and adjust your budget.
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