Saving for retirement: Clark Howard’s guidelines to get on track

ATLANTA — A staggering 44% of Americans say they’re not on track when it comes to saving for retirement, according to the Federal Reserve.

Many of them have some kind of savings or investment plan, but they’re not making the most of it.

Saving for the future is one of those things that really intimidates people.

Channel 2 consumer adviser Clark Howard says when it comes to retirement, there’s no one size fits all plan but the first step you need to take is to start saving.

“How are you going to navigate having student loans and saving for retirement, saving for a rainy day?” Howard asked college student Sophia Watkins.

“We haven’t gotten that far,” Watkins said.

“Honestly, the goal at this point is paying off student loans and then probably worrying about retirement after that,” law student Sam Masters said.

Howard said while paying down debt is important, it can’t be the only thing you focus on because the earlier you start saving, the better.

A person who starts investing $100 each month at 20 years old will earn hundreds of thousands more than a person who starts investing $1,000 each month at the age of 50.

“I could be putting a lot more away,” Kyle Banks said.


He’s not alone. More than half of all working Americans have a 401k or similar plan, many aren’t putting enough of their paycheck towards it.

“What percent of your pay have you been comfortable putting in the 401k?” Howard asked certified public accountant Josiah Oakley.

“It’s been about 4%,” Oakley said.

If your company offers a 401k plan, use it. If they offer to match what you contribute make sure you’re investing at least that much from every paycheck.

If you’ve got a Roth 401k option, take it. Why? The money you put in a Roth is already taxed, which means you withdraw it tax-free.

Howard said the key is to invest as much as you can in your budget.

If you’re self-employed, Howard suggests you look into a SEP, or self-employed pension. It works much like a Roth IRA. Schwab, Fidelity, and Vanguard all offer them.

For people looking to retire in less than five years, consider keeping less of your money in stocks and more in bonds. It’ll reduce your risk of more loss.

Howard also suggests setting aside three years of expenses, including Social Security and pensions in that number.

“I’m hoping to have $2 million by the time I’m 65, so I can live off dividends and interest, hopefully with that. That’s about 25 years away,” Ryan Hall said.

If you’re already on track and have years before retirement, Howard says to stay the course. There will always be ups and downs. The key: don’t panic.

“No matter where they’re at financially, what they’ve done, the mistakes they’ve made, there’s always more they can do. And there’s always hope that if they do those things, they’ll always have a brighter future than what they are currently,” entrepreneur Victor Vilardi said.

Howard says if you’ve never saved a penny for retirement, start saving one cent of every dollar you make. Every six months keep stepping it up another percent.

If you are saving but you’re not saving enough, then Howard says to follow his six-month rule. Every six months go up another percent until you’re saving 15% of what you make.

It sounds like it would hurt too much but Howard says you can get it done.