Americans doing poor job of saving money

Although some workers report having savings in addition to retirement savings, the total savings and investments of many Americans are still low, according to the survey.

People are doing a poor job of saving money across all age brackets. Sixty-four percent of 25 to 34 years old have saved less than $25,000. Of those surveyed between the ages 35 and 44, almost half have saved less than $25,000 as well.

The savings picture does not get much brighter for those closer to retirement. For pre-retirees between 45 and 54 years old, 30 percent have saved less than $25,000. Perhaps most worrisome of all is that for those nearing and already in retirement at 55 years and older, 29 percent have still saved less than $25,000 and only 10 percent have saved $50,000 to $99,999.

Saving for retirement might be the single largest financial challenge of all. With longer life expectancies, retirement funds need to last longer than ever before. Here is a guide seperated by age groups to use when you are gauging how you measure up financially:

In your 20s

If you have credit card debt, now is the time to reduce or eliminate it and to commit to not increasing that debt in the future. You should start saving money in your 20s – as much as you can – and remember that with the power of compounding, even a little savings put away now can make a big difference in the long run. If your employer sponsors a retirement plan, participate in it at least up to the match, or you’re passing up free money.

In this age bracket, you can also afford to be more aggressive with your long-term investments, so consider a portfolio with nearly 100 percent stock funds. Finally, if you get married, determine your new investment contributions and allocations, taking into account your combined income and expenses.

In your 30s

Create a preliminary estimate of what you will need in retirement. Keep focused on savings, and if you find yourself changing jobs, remember to roll over your 401(k) savings to an individual retirement account or to your new employer’s retirement plan.

When you get a raise, increase the amount you contribute to your company-sponsored retirement plan. If you are eligible, consider contributing to a Roth IRA.

If you have a baby, don’t forget to increase your cash reserves and your life insurance. Also, begin a college savings plan. When you are ready to buy your first house, invest some of your nonretirement savings in a short-term investment specifically designated for funding your down payment, closing and moving costs.

In your 40s

At this point in your life, you might need to balance the demands of saving for retirement and college expenses for your children, if you have them. This is when your financial plan can be an excellent tool to help keep you on track to meet those goals and other demands. Consider making some changes to your portfolio’s asset allocation to reduce your stock holdings and introduce some fixed income investments.

In your 50s

If you’ve fallen behind in your savings, use this decade to catch up. Your income is probably at its highest and the kids might have moved out of the house. Both 401(k) plans and IRAs have catch-up provisions for people older than 50.

When you reach 55, don’t forget to review your retirement fund asset allocation to accommodate for the shorter timeframe for your investments.

In your 60s

As you approach retirement, you will need to make additional adjustments to your portfolio to ensure that it will provide you with the income you need after you stop working. When you do retire, consider the many benefits that moving your employer plan to an IRA provides. Reallocate your investments to provide the income you need while still providing for some growth in capital to help beat inflation and fund your later retirement years.

Seek help

While many consumers are focused on comparing themselves to their peers or people of the same age, at the end of the day, that’s not especially important. What is important is whether you’re on track to achieve personal long-term financial goals.

Ask yourself:

• Do I know how much I need to retire?

• Do I pay all my bills and save a portion of my income regularly?

• Am I protecting what I have with life, disability, health and homeowners insurance?

Paula Dougherty, CFP, ChFC, CLU, is a certified financial planner with American Express Financial Advisors Inc., member NASD. American Express Co. is seperate from American Express Advisors Inc. and is not a broker-dealer.

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