Running out of money in old age is a key concern for Americans preparing for retirement.
Maximizing the possibility of a comfortable retirement is more important than ever, as New research from Morningstar predicts that 45 percent of American households will struggle financially in retirement.
But taking simple steps will ensure that the vast majority of Americans don’t miss out on their silver years.
Morningstar found that the best way to ensure a comfortable retirement was to invest in a workplace pension plan.
The investment research firm said 79 percent of Americans who invested in a defined contribution plan, such as a 401(K) or 403(b), and did so for at least 20 years would have enough money for retirement.
A simple move can be the difference between a comfortable or stressful retirement
The second step to ensuring financial well-being during retirement is finding the right time to stop working, CNBC reported.
The longer you wait, the greater your chances of having enough money until the end of your life.
Morningstar predicts that about 45 percent of households retiring by age 65 will be broke.
However, if that age is extended to 70, the odds drop dramatically to 28 percent.
Social Security benefits, a key pillar along with the 401(K) for retirement income, kick in at age 67 for anyone born after 1960.
However, the Social Security Administration will increase the payment by 8 percent for each year beyond full retirement that you delay claiming, until age 70.
“The model paints a clear picture: Participating in an employer-sponsored defined contribution plan significantly reduces the risk of retirement shortfalls,” said Spencer Look, associate director of retirement research at Morningstar.
“Not only does our model set a new standard in retirement research, but we will also be able to identify useful insights for policymakers and plan sponsors to improve product design, all with the goal of helping more Americans achieve their retirement goals.”
The longer you wait to retire, the greater the chances of having enough money.
“The biggest lesson for young people – or at least something really important to highlight – is that if you have access to a plan but you don’t participate, we definitely encourage you to participate, just saving something is better than nothing,” Look added.
The report also found that some demographic groups were at higher risk of experiencing financial difficulties in retirement.
According to the results, around 55 percent of single women could be at risk during retirement, compared with 41 percent of couples and 40 percent of single men.
While saving more diligently is recommended to help people take control of their retirement plans, Morningstar also said the findings should make the industry sit up and take notice.
“The retirement industry should focus on providing more Americans with access to an employer-sponsored plan and improving participation rates for those who already have access,” the report argued.
‘Plan sponsors should consider adding automatic enrollment and additional features to a plan, such as a matching student loan or emergency savings account, to increase participation.’