How saving an extra $12 a week into your 401K - the cost of just two takeout coffees - could make you $85,492 richer in retirement
- Fewer than half of Americans are saving enough money into their 401Ks
- But upping your contribution rates by just 1% could make a huge difference
- Experts reveal how much you need to save to enjoy a comfortable retirement
Americans are sleepwalking into financial disaster after it emerged fewer than half of households have sufficient cash in their 401K pots.
Red-hot inflation has forced young people to put their savings plans on hold - but it could leave them working into their 70s to compensate.
The issue is compounded by stock market turbulence, which caused the average 401K fund to sink by 20 percent from $130,700 in the last quarter of 2021 to $103,900 by the end of last year.
But financial experts insist just the smallest of changes can transform your retirement dreams.
Analysis by Fidelity International - the largest 401K plan provider in the US - found that a 35-year-old on $60,000 could earn an extra $85,492 in retirement if they upped their pension contributions by a modest 1 percent.
![Fidelity International breaks down how upping your pension contributions by just 1 percent could transform your retirement dreams](https://i.dailymail.co.uk/1s/2023/04/19/15/69989085-11987389-Fidelity_International_breaks_down_how_upping_your_pension_contr-a-2_1681914017759.jpg)
Fidelity International breaks down how upping your pension contributions by just 1 percent could transform your retirement dreams
In real terms, it would mean saving just an extra $12 per week.
This works out at around two and a half takeout coffees a week - or ten a month - which are on average $4.90 each, according to data analytics company NPD.
Meanwhile a 45-year-old earning $70,000 could increase the value of their 401K by $49,925 if they upped their contributions by 1 percent between now and the time they retire.
For these workers, it would require sacrificing an extra $14 a week, according to Fidelity's analysis.
A third example given by the firm is a 55-year-old on a salary of $80,000.
By upping their contributions by 1 percent - or $16 per week - they could accrue an extra $16,779 by the time they retire.
The analysis assumes that workers retire at 67 and benefit from a nominal investment growth of 5.5 percent.
Ann Dowd, vice president of Fidelity, said: 'Saving for retirement may seem like a steep mountain to climb but the climb doesn't have to be as steep as it looks.
'Small steps now can turn into big strides later.'
![Fidelity found that a meagre 29 percent of people are on track to cover all of their expenses in retirement, down from 38 percent in 2020.](https://i.dailymail.co.uk/1s/2023/04/18/17/69963471-11986313-Fidelity_found_that_a_meagre_29_percent_of_people_are_on_track_t-a-1_1681836421440.jpg)
Fidelity found that a meagre 29 percent of people are on track to cover all of their expenses in retirement, down from 38 percent in 2020.
The majority of US workers rely on an employer-sponsored 401K for their retirement plan.
Approximately 62 percent of US businesses offer 401K plans with automatic enrollment policies, according to investment firm Vanguard.
Auto-enrollment means a fraction of a worker's salary goes straight into their 401k from their paycheck, which is then matched or partially matched by the employer.
The Financial Industry Regulatory Authority says most employers use a 3 percent default contribution.
However workers are encouraged to up these contributions - especially as their salary increases.
And it is critical that employees start saving as early as possible to give more time for their money to grow through compound interest - which is when you earn interest on both the money you have initially put aside plus the interest you have already accrued.
For example, if you invested $10,000 with a 10 percent annual return, after one year you will have $11,000. The next year the 10 percent interest is applied to the $11,000 rather than the original figure.
It means in ten years' time your $10,000 pot will have grown to $25,937.
![Some 11 percent of Americans were not at all on track to meet their retirement needs - unless they make significant adjustments to their lifestyle](https://i.dailymail.co.uk/1s/2023/04/18/17/69963481-11986313-image-a-2_1681833842572.jpg)
Some 11 percent of Americans were not at all on track to meet their retirement needs - unless they make significant adjustments to their lifestyle
But soaring inflation - sparked in part by Russia's invasion of Ukraine - has meant households are less and less likely to save.
Yesterday it was revealed that a meagre 29 percent of Americans are on track to cover all of their expenses in retirement, down from 38 percent in 2020.
And it is young people who have borne the brunt of the crisis, with 55 percent of 18 to 35-year-olds saying they have been forced to put their savings on hold.
The latest figures reveal that only 28 percent of millennials and generation Z-ers - those aged up to 42 - are on track to cover all of their retirement expenses - compared to 33 percent of baby boomers and 29 percent of generation X.
Baby boomers are those aged 59 to 77, while Generation X refers to people aged 43 to 58.
Across all generations, 11 percent of Americans were not at all on track to meet their retirement needs - unless they make significant adjustments to their lifestyle.
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