Retirement planning is an internationally daunting challenge.
The Transamerica Center for Retirement Studies, a nonprofit research arm of insurer Aegon, surveyed 9,000 people in the United States, the UK and seven European countries and found a universal truth:
The amount of money people will get from government programs like Social Security isn't enough to live on.
The last five years of worldwide recession has made that abundantly clear almost everywhere, and for many people that news has come as a shock. "It feels like people are going through a grieving phase before becoming more proactive about managing their retirement," says Catherine Collinson, president of the center.
If you're among those frozen in place, here are five pieces of good advice from Collinson and Transamerica for shaking off the cobwebs and putting your retirement plan in gear.
Commit early. Start saving 10 percent of your paycheck from your first job forward. If you never have that 10 percent to spend, you won't miss it.
Don't leave money on the table. Make sure you get all employer matches and Uncle Sam's savers tax credit if you qualify.
Study up. There is no reason to be a financial illiterate. You don't have to be Warren Buffett, but everybody needs to learn enough so that they can ask informed questions about things like rates of return and fees.
One size doesn't fit all. Target-date funds are popular among 401(k) savers because they are set-it-and-forget-it savings plans. "These funds are great for people in their 20s, but by the time people get to their 40s and 50s, everybody's family balance sheet is different and life is exponentially more complicated. At that point, you may need a more customized approach," says Collinson.
Whatever you do, don't cash out. If you change jobs, roll the money over into an IRA. Paying taxes and penalties on top of spending what you've saved puts you way behind the eight ball.