A recent study finds the average person will likely find themselves significantly short of what they need to cover their expenses come retirement. NY1's Tara Lynn Wagner filed the following "Money Matters" report.
Get ready to tighten your belt in retirement. A new survey finds Americans will likely see their income drop about 28 percent after they stop working.
"And that's an average. There will be some that would be a little bit better and some will be quite a bit worse than that," says Fidelity Investments Life Insurance Company President Jeff Cimini.
According to Fidelity’s new Retirement Savings Assessment, a generation Xer looking to maintain their quality of life will probably miss their mark by about $1,700 a month. A baby Boomer has it even worse coming up about $2,100 shy of their monthly goal.
"Part of it is a shift from defined benefit plans to defined contribution plans, part of it is the way Social Security is designed and part of it is just the way in which folks have kind of saved for retirement, their expectations of what they need," Cimini says.
The good news is there are things you can do to help close that gap. If you're in your 20s or 30s, Fidelity's Jeff Cimini says time is on your side, so use it wisely. Contribute more to your 401K if your company offers one. Put the maximum allowed into an IRA. And he says save for -- and buy a home -- as a means of reducing your post-retirement expenses.
"By the time you get to retirement, if you've paid off that mortgage, that's one very large expense you've gotten out of the way," adds Cimini.
As for Baby Boomers, he says it's not too late to make significant headway. Take advantage of rules that allow you to play catch up and rebalance your portfolio to protect those increased investments.
"Continuing to invest in IRAs and making your annual contribution right up and through retirement," Cimini says. "If you're working part time in retirement, you can still contribute to your IRA, which again, accumulates assets in a tax deferred way."
But a word of warning: Don't bank on the idea that you'll continue to work part time.
While 66 percent of people say they plan to keep working, Cimini says research indicates that only about 10 percent actually do that.
To estimate how much you should be saving for retirement, visit fidelity.com/retirement/planning.