I sat down with InvestorPlace’s Jeff Reeves to chat about Americans’ savings habits…or lack thereof. You can read Jeff’s full article here: Americans struggle to sock away retirement savings.
Here is an excerpt:
According to a 2014 survey from the Employee Benefit Research Institute, only 64%
of Americans have reported saving any money at all for retirement to supplement anticipated Social Security benefits. Those with some savings typically don’t have much. The EBRI survey found that roughly six of every 10 Americans have less than $25,000 in total retirement savings.
“Americans just don’t save enough,” says Charles Sizemore, chief investment officer of Sizemore Capital Management in Dallas. “The question, of course, is why?”
Sizemore says another reason Americans have such trouble with retirement planning is cultural, based on our behaviors and emotions.
“Life is pretty stable here, and we have basic safety nets in place. The countries with the highest savings rates tend to have little or no safety nets, and people are forced to fend for themselves in old age. So in a lot of ways, our success and stability have made us a little lax in our attitudes toward saving,” Sizemore says.
Couple that with a lack of mandated savings, and you get an understandable problem.
“In many countries, 401(k)-style contributions are required by law the same way that Social Security [withholding] is here,” Sizemore says. “To the average 22-year-old in their first college job, the priority is paying the rent. Retirement savings is not high on the priority list.”
Investment adviser Charles Sizemore notes that it’s important for older Americans to take advantage of the increased cap on tax-sheltered retirement instruments such as an IRA or 401(k). A typical IRA is limited to $5,500 annually in contributions, but for those age 50 or older, the ceiling is raised to $6,500. It’s similar with 401(k) plans, where the limit is $18,000 for tax year 2015, but those age 50 or older can save up to $24,000.
In addition to supercharging your savings, you can sometimes “save a boatload on taxes” by reducing your taxable income via one of these tax-deferred investment instruments, Sizemore says.