The way working-class Americans feel about their ability to retire is growing bleaker.
The problem is, people just don't think they have enough savings accumulated to stop working...
A staggering 54% of all U.S. workers plan on retiring after the age or 65 or not at all, according to the Transamerican Center for Retirement Studies (TCRS). According to a 2015 survey done by the Employee Benefits Research Institute, one in 10 workers believe they'll need a minimum of $1.5 million in savings to retire comfortably. That's half a million more than Americans thought they needed a decade ago.
But armed with a little more information, there are a few easy-to-follow tactics every retirement investor can use to maximize savings.
Here's how to make your 401(k) grow faster, with a little help from Money Morning Chief Investment Strategist Keith Fitz-Gerald -- a 30-year market analyst recently hailed by Forbes as a "Market Visionary"...
How to Make Your 401(k) Grow Faster
Rule No. 1: Enroll
According to Bloomberg, two-thirds of Americans don't contribute anything to a 401(k) or other retirement account available through their employer.
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Many workers feel they just can't spare the cash due to other financial concerns. Additionally, some don't know what a 401(k) is or how it works -- especially if employers aren't making much of an effort to sign them up. For example, the only info an employee might receive on 401(k)s could be part of a stack of orientation papers received the first day on the job.
But putting something -- anything -- into a 401(k) throughout your working years will pay off big time. To put into context what enrolling in a 401(k) and just contributing a few hundred dollars a month can do for you, here's an example Fitz-Gerald told members on Dec. 19, 2016:
Imagine you being investing in May 2001, right before the dot-bomb crash hit and the Dow saw a 21% decline in just 21 months. But despite the panic all around you, you faithfully contributed a few hundred dollars to your 401(k) each month.
Then after a few hopeful years during which the markets show signs of life again, the Global Financial Crisis hits and all your gains were wiped out. From September 2007 to March 2009, the Dow loses 55% of its value. And the S&P 500 returns just 1.56% from May 2001 to May 2012.
But unlike millions of other investors, you have a huge grin on your face. That's because by May 2012, you've stashed away $150,000 of your own money, and now, your retirement account balance reads well about $500,000.
And you didn't do it by picking out only the best stocks, or stocks at all for that matter... rather, every dime of the $150,000 you stashed away over 11 years went to mutual funds offered by your work place retirement plan. There was nothing special about them, either.
That's the power of enrolling in your employer's 401(k) plan.
Rule No. 2: Accept the Free Money
Once enrolled, be sure to take a look at what contribution level your company allows. (A contribution level is the amount of money, usually a percentage, that you can have directly deposited into a 401(k) pre-tax.)
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At a bare minimum, employees should contribute enough to take advantage of the employer-matching program. That's the amount your company will "match" your percentage contribution. In other words, if your company pledges to match 6% of your 401(k) contributions, aim to contribute at least 6% of your paycheck to your 401(k) -- that way, you're actually getting 12% added to your savings account. It's free money!
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According to data from the Investment Company Institute (ICI), about three-quarters of 401(k) plans covering 90% of Americans have some form of employer-matching policy, and for many employers the standard is a 50% match for up to 7% of your paycheck.
That equates to an automatic 50% return on every dollar that your company matches for most U.S. workers. For example, "if you earned $1,000 each pay period in gross income (before taxes), and automatically deducted 6% pre-tax to stow away in a 401(k), your account would grow by $90 each pay period," Fitz-Gerald explained. With a 6% contribution of $60 plus the company's 50% match of that (3%), the total contribution would be 9%, or $90, into savings.
Rule No. 3: Manage the Account
Once you're enrolled and contributing, it's important to keep on top of the account. Don't be tempted to forget all about it...
According to CNBC on Nov 18, 2016, "it's crucial that people determine an investment plan and regularly rebalance the portfolio to target allocations." That's because your investing goals will change as you age -- you may become more risk averse, for instance. Many 401(k)s offer powerful tools like online calculators and worksheets for determining contribution amounts and risk tolerance to help you meet retirement goals.
But Fitz-Gerald can remove some of the heavy lifting for you right now. He laid out for readers a strategy to make retirement as profitable as possible, right here...
More on Retirement
401(k)s will be driving the markets in the near term, but there's another retirement investment Keith Fitz-Gerald wants our Members to know about. It's one of his favorites, a kind of "desert island fund" he'd buy if he had to park his money in one place, "retire" from civilization for 20 years, and come back to a pile of money. Click here to learn more...
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