Retirement Saving Doesn't Have to Be So Stressful

The retirement savings crisis in America is easy to understand from at least one perspective: Most people find building a nest egg to be stressful, and to cope they may avoid it altogether.

The anxiety is found among all ages, according to a Schwab survey of 401(k) plan participants. Four in 10 cited building adequate retirement savings as a significant source of financial stress—ahead of the 24% naming job security, 21% naming paying off credit cards, and 20% naming keeping up with monthly expenses.

Millennials are no exception. Even though they have three decades or more before retiring, 38% said saving for that moment is a major source of stress—ahead of the 29% struggling to keep up with monthly expenses, 26% dealing with credit card debt, and 24% stressed about student loans.

Savers overwhelming accept that they must take responsibility for their own financial future: Nine in 10 say they are relying mainly on their own efforts. This suggests a broad understanding of the poor condition of our pension system—an understanding that probably goes deeper than that of our presidential candidates who are either avoiding the issue or fixating on Social Security.

The candidates are missing a big chance to score with voters: 77% in the Schwab survey said saving enough to retire is a major public policy issue. Meanwhile, Hillary Clinton has only a slight edge over Donald Trump (52% vs. 48%) in terms of which candidate is seen as better on pocketbook issues, Schwab found.

Workers are committed to their 401(k) plans. In the first quarter, just 1.1% of plan participants stopped contributing, according to a report from the Investment Company Institute. Only about 5% made any investment changes, suggesting most savers understand the value of staying the course over the long haul. But 17% have 401(k) loan balances, ICI found. That elevated level has been constant since the Great Recession.

Nine in 10 workers call a 401(k) a “must-have” benefit, Schwab found. Yet about half in a plan feel it is impossible to save enough in the plan to secure a comfortable retirement, and only about half feel they are managing their plans well. Those are troubling numbers considering that for 59% of workers their 401(k) is their largest or only source of retirement savings. Defined contribution plans hold a quarter of all retirement savings and a tenth of all individuals’ financial assets, ICI found.

How can you more easily manage this vital savings account? Schwab found that a third of plan participants have either cut or never increased their contribution rate. Try raising your contribution rate by 1% or 2% of pay every year until you are saving 12% to 15% of pay. Even better: Put this feature on autopilot.

Schwab also found that a third say they cannot cut lifestyle options like dining out or vacations in order to save more. Try paying your future self—that is, your retirement accounts—first. Set a budget based on after-contribution income—and do not fill in the gaps with credit cards.

Finally, just 10% of plan participants are using professional 401(k) advice. Most workers are in plans that have begun to offer some kind of no-fee counseling. Check with your benefits department. You likely have an independent source of online advice, and increasingly the opportunity for a free face-to-face meeting with an adviser.