How to beat the retirement savings "action gap"

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(MoneyWatch) Although most people are willing and able to save more for retirement, they're often unsure just how to go about it, according to recent survey by State Street Global Advisors that highlights this so-called action gap.

A large majority of the respondents -- 83 percent -- said they could cut their household budget by at least five percent to increase their retirement savings, while 64 percent said they could cut back as much as 10 percent. Fifty-two percent of the surveyed employees said they'd even be willing to increase their 401(k) contributions to as much as 10 percent of their pay if their employer automatically increased their 401(k) savings rate by one percent each year.

So what's stopping people from saving more? Frankly, it's a head-scratcher. For example, although 78 percent of the respondents said they know it's important to determine how much they must save to ensure a secure retirement, only 33 percent claim to have the knowledge to calculate that amount.

The Retirement Savings Menu: a visual take on how much you should save
How to pick a target date fund
Top tips for using retirement calculators

I realize that it takes some time and effort to estimate how much you need to save for retirement, and I've written previously about how to figure that out. But let me give you some additional advice: If you have the room to reduce your household budget by five to 10 percent so you can save for retirement, go ahead and save more.

Unsure how of much you need to save to have a secure retirement? Don't use that as an excuse to put off saving more -- chances are high that you're not saving enough and that you're short by a large margin, so any additional savings is much better than doing nothing.

Today, go online to your 401(k) plan administrator or pick up the phone and increase your retirement contributions by five to 10 percent of your pay. Then take the time in the weeks and months ahead to calculate how much you should save for retirement and adjust your contributions accordingly.

Don't know how to invest? Don't let that hold you back. Pick the target date fund in your plan if one is available, or select a mutual fund that's balanced evenly between stocks and bonds. You can always take the time later to learn more about investing. Today, though, go ahead and save more.

If you don't have a 401(k) plan, explore purchasing an IRA, or simply open an investment account with an established mutual fund company. Vanguard, Fidelity, and T. Rowe Price are all good places to start for any type of retirement savings; they have low-cost mutual funds and non-commissioned telephone representatives who will guide you through the process. So go ahead and save more.

If you're like many people who are motivated by emotions rather than logic, check out my Retirement Savings Menu post. It motivates you to save more by showing you what your life could be like in retirement.

One of the State Street study's conclusions for employers that sponsor 401(k) plans is that simplicity and repetition are key to engaging employees to help them close the action gap. So today, go ahead and save more.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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