U.S. workers are spending more and saving less. A new survey identified half a dozen reasons why.
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As costs rise and wages stagnate, it gets tougher and tougher to cover the bills. Having even a few dollars left in checking at the end of the month might feel like a victory. But the focus on covering daily essentials can mean shorting ourselves on retirement savings.
More than 4 in 10 (44%) of workers surveyed by Charles Schwab have “altered” their 401(k) investing, even as they also report that the plan will be their primary source of retirement income.
The survey was based on interviews with 1,000 401(k) plan participants in the United States, ages 21 to 70. Almost 8 in 10 (79%) have been hit by inflation, causing them to cut back on purchases, buy cheaper items and throttle back on debt payoff. Even so, the study says, many workers are saving less and spending more in general.
All in all, saving for retirement has gotten harder, due to the following obstacles.
Respondents who face this obstacle to saving for a comfortable retirement: 21%
Family income and savings cover 45% of college costs, and parent loans cover an additional 9%, according to Sallie Mae’s 2021 “How America Pays for College” report.
Well-intentioned parents who prioritize college savings could be left without enough money in retirement. Those who borrow for their kids’ education could find that federal PLUS loans have unexpected ramifications; for example, if you go into default, your wages, tax refund or even your Social Security payments may be garnished.
As Money Talks News founder Stacy Johnson puts it, “Running out of money while in college isn’t great, but it’s better than running out of money in retirement.”
Respondents who face this obstacle to saving for a comfortable retirement: 24%
Between 2018 and 2020, Americans paid about $120 billion per year in credit card interest and fees, according to the Consumer Financial Protection Bureau. That averages out to about $1,000 per household.
The more you pay out in interest, the less you can save — and your credit card interest rate might be going up, thanks to recent hikes in the federal funds rate. So if you’re carrying credit card balances, see “Tips and Tricks to Help You Destroy Debt.”
After payoff, you need a plan to keep you from tumbling right back into debt. The Money Talks News Solutions Center can help you build a workable budget.
Respondents who face this obstacle to saving for a comfortable retirement: 33%
Car repairs, dead appliances, medical copays and other unexpected expenses can mean there’s less money to save for retirement.
Yet many such expenses aren’t truly unexpected. For example, you know that your new car won’t be new forever and that the refrigerator that came with the house will eventually give up the ghost.
That’s why emergency funds were invented. Even if you can’t set aside big bucks each month, most people can save something — and whatever you can save lessens the amount you’ll have to finance. “How to Build a Family Emergency Fund” can get you started.
Respondents who face this obstacle to saving for a comfortable retirement: 33%
There’s nothing we can do about the stock market’s ups and downs, and stocks are the most reliable way to save for the long term. Yes, that’s true even in a bear market because eventually things will change.
Watching a retirement account shrink can tempt workers to quit adding to it. Big mistake: Prudent investing is the best way for most people to build a secure retirement, and that means making regular contributions.
Respondents who face this obstacle to saving for a comfortable retirement: 35%
Due to recent (and sometimes scary) jumps in the price of food, fuel and other necessities, it costs more just to cover the basics each month. Worst-case scenario: If some months you can’t meet those regular expenses, credit card debt begins to grow.
You can’t do without necessities, but you can get smarter about how you define them. Start with a budget that helps you separate wants from needs — and which includes “saving for retirement” as a line item. Add other tactics (trimming subscriptions, taking in a roommate, getting a side hustle) if necessary, until the books balance.
Respondents who face this obstacle to saving for a comfortable retirement: 45%
Near double-digit inflation is putting a hurt on millions of households. When you’re having trouble covering essential expenses, it’s tempting to pull back on investing.
Make no mistake: Saving for retirement is an essential expense. It might take a few years for the economy to improve but those are years you can’t get back, investing-wise. Stay calm and stay the course because long-term investors ultimately prosper.
These days, relatively few people can count on retiring with a fat pension. It’s up to most of us to save for our own retirement, whether that’s through a workplace plan, IRA, annuity or some other way of setting aside money for your golden years.
Inflation and the other issues mentioned earlier make it harder and harder to save. But since Social Security generally isn’t enough to live on, having another income source is crucial. Here are some articles to help get you going:
“7 Ways to Save For Retirement Without a 401(k)”
“6 Ways to Supersize Your Nest Egg After 50”
“7 Fast Ways to Catch Up on Retirement Savings”
“11 Figures You Need to Know for a Secure Retirement”
Nobody cares more about your retirement than you do. Except maybe us! Subscribe to the free Money Talks News Newsletter and receive money-saving tips from financial experts, two free e-books and information about coupons and deals to save you money when you shop.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.
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