What Americans Are Saving For -- It's Not Retirement

Olivia Wood, a Millennial social media specialist for a community bank in Pennsylvania’s Lehigh Valley, is saving for a trip to Iceland. “I want to be able to travel while I’m young, so I stay ahead of the curve, and always have a little extra for spontaneous trips,” @oliviawood_610 tweeted in a chat promoting America Saves Week. She uses Intuit’s @mint app to help budget and track spending, treats savings as a monthly bill, and sleeps on big purchases. Retirement savings? That’s next on her agenda.

America Saves Week, sponsored by the Consumer Federation of America and the American Savings Education Council, wants more Americans like Wood to do whatever they can to save. That means paying off consumer debt, building a rainy day fund, saving in a workplace retirement plan and/or an Individual Retirement Account, making savings automatic, and paying down your mortgage.

“It’s important for all of us to better understand the sometimes competing needs of day-to-day living expenses and retirement savings,” says Harry Conaway, chairman of the American Savings Education Council.

Only half (52%) of non-retired Americans say they’re saving enough for retirement with a “desirable standard of living,” according to an annual survey done in conjunction with America Saves Week. That was down three percentage points from last year and down six percentage points from 2008 (58%). That could mean more people are in bad shape—or maybe just that more people realize they’re in bad shape and need to start or ramp up savings. “As individuals become more educated, they grow more realistic where they are relative to [retirement] needs; it could be a positive trend,” says Conaway.

The survey pointed out a significant gender gap — 57 percent of non-retired men say they’re saving enough for that desirable retirement, compared to only 47 percent of non-retired women who feel that way. Women are worse off than men in a dozen separate measures of savings know-how. Less than a quarter of women are saving at least 10% of income, compared to a third of men.

Every day expenses — and splurges — seem to be on the top of mind for many savers. You can share a #imsavingfor photo and your savings goal on social media at AmericaSavesWeek.org/imsavingfor for a shot at winning $500. Savers so far say they’re saving for a house, for college, a Mazda RX8, goats, a ski trip, a new stove, a fence, a pair of Valentino heels, a photography class, a better future.

Here are 5 steps to smarter savings.

Step 1: Pay off consumer debt. Tackle high interest credit card debt first. Of those surveyed 38% said they had no consumer debt—key to starting an aggressive savings plan.

Step 2: Build a rainy day fund. That’s different than your savings for If you save in a Roth IRA, you can always take back contributions without penalty.

Step 3: Save in a workplace retirement plan. You might be automatically enrolled in your workplace retirement plan (like a 401(k)). If not, sign up, and contribute at least enough to get any match money your employer might kick in. If you’re already enrolled, you might be saving at a low 3%, the most common default. Try to bump up your contribution amount; if your employer offers auto escalation, it will be automatic.

Step 4: Make savings automatic. Ask your payroll administrator if they can direct a portion of your paycheck to a savings or brokerage account. Alternatively, ask your bank or credit union to help you set up automatic transfers from your checking account into savings. You can fund a new government myRA retirement account or an Individual Retirement Account that way. If you’re due a refund at tax time, direct at least part of it into savings.

Step 5: Pay down your mortgage. The most important way the American middle class has saved over past 50 years is by buying a house and religiously making mortgage payments, making them on time and even early, says Conaway. If you haven’t refinanced lately, look into it now, and use it as an opportunity to shorten the term of your loan. And don’t be tempted to borrow on the equity in your home, Conway warns.