Retirement Crisis Deepens as Trump Proposes Government-Backed 401(k) Rescue

Earlier this week, President Trump called for the creation of a government-backed 401(k) program for folks who don’t receive employer matches.

At the moment, that includes about 56 million people, according to Newsweek.

To help, Trump said, “My administration will give these oft-forgotten American workers, great people, the people that built our country, access to the same type of retirement plan offered to every federal worker.  We will match your contribution with up to $1,000 each year.”

That could certainly help those who qualify.

Unfortunately, it’s not the only issue plaguing those with some hope of retirement. 

About 57% of Americans say they’re behind on their retirement savings, as noted by Bankrate’s Retirement Savings Survey. About 35% say they’re significantly behind.

“Only 15 percent of workers feel ahead of where they should be, including 9 percent who feel slightly ahead and 6 percent who feel significantly ahead. Another 22 percent feel they’re right on track with retirement savings,” they added.

But that doesn’t have to be your experience.

As most of you know, saving for retirement is important.

Ideally, you want to start as early as possible. Even just a small amount invested in your 20s can add up to a substantial amount of money by the time you reach your 60s. Even if you got a late start on saving, it’s never too late to start putting away money for your retirement.

Here are just a few ways to ensure you can retire.

No. 1: The rule of thumb is 10%. 

If you can, set aside 10% of your salary into a “don’t touch” retirement account.

According to Fidelity, by the age of 30, have at least a year’s worth of salary saved. So, if you earn $80,000 by the age of 30, you should have at least $80,000 saved. By 40, have three times your salary saved. By 50, six times, by 60, eight times. By the age of 67, if you’re thinking of finally retiring, have at least 10 times your salary saved. 

No. 2: Contribute to Individual Retirement Accounts.

An IRA allows you to save for retirement with tax-free growth or on a tax-deferred basis.

You can invest in a traditional IRA, for example. While it’s best to check with your financial advisor, many times you can deduct contributions on your tax return. Plus, earnings can potentially grow tax-deferred until you withdraw funds in retirement. 

There’s also the Roth IRA, where you make contributions with money you’ve already paid taxes on. With a Roth IRA, your money can grow tax-free with tax-free withdrawals. But again, check in with your financial advisor before doing anything.

Or, if you’re self-employed, look into the Solo 401(k), a variation of the 401(k) plan but specifically set up for those who work for themselves. You can also set up a SEP IRA, or a Simplified Employee Pension plan.

There are other options, too. Just be sure to check with your financial advisor so you’re fully aware of what your options are moving forward.

No. 3: Know Your Retirement Needs. 

Know when you want to retire: If you have a retirement age in mind, it’ll help you determine how long you have to put money away for the big day. It’ll also give you a dollar amount you should fight to save every year until then.

Know how much you may spend in retirement: Do you plan to travel? Do you plan to buy an expensive car, a home, or maybe sit in a casino? Or, do you plan to just take it easy at home and put money away for your children?

Know how much you expect to pull from retirement funds every year: The last thing you want to do is run out of money during retirement. To help, analysts recommend a 4% average withdrawal rate per year to make sure you will have enough cash on hand to live. While 4% is a widely accepted approach for many retirees, check in with your financial advisor.

No. 4: Create a budget today. 

This is crucial. Without a budget, many of us lose track of what’s coming in financially and what’s going out. In fact, when others have asked me for financial advice, my top question is: What are you spending on? Unfortunately, I’m often met with a deer-in-the-headlights stare and a response of “I don’t know.” But not knowing will destroy you financially.

No. 5:  Set up an emergency fund. 

Many things in life are unpredictable, especially medical issues. So, you must have emergency funds set aside just in case. Some analysts say you should have at least three to six months’ worth of living expenses set aside with it.

And, if you don’t have one set up, start small with an emergency savings goal of at least $1,000. Sure, it’s small, but it’s a safety net, and it’s a start. If you can put away about $85 a month, you’ll reach that goal and have some wiggle room.

Such an account should only be used for a true emergency. Don’t touch it if you need money for a vacation, or if you want to go to the casino. Also, keep this account liquid. It should be easily accessible at all times. This way, should things go nuts, you have funds to cover it.