Key Takeaways
- Most workers have started saving up for retirement, but economic pressures have made it difficult for them to continue their saving habits, a recent survey found.
- Many workers have stopped retirement saving, reduced their monthly contributions, or taken money from their accounts to afford essentials or achieve financial goals.
- Although shifting financial priorities away from retirement accounts could negatively affect workers in the long term, many have been able to make up the difference.
With the high cost of living and more than half of workers still recovering financially from the pandemic, many Americans have dipped into their retirement accounts or cut their contributions to afford essentials.
More than eight in 10 employed workers are saving for retirement at a median age of 26, and the median household has saved $82,000, according to a survey released earlier in March by the Transamerica Center for Retirement Studies (TCRS).
However, economic pressures have made it difficult for many workers to continue their saving habits. As inflation increases the cost of living, 72% of workers said they have taken measures to address the financial strain caused by rising inflation, and 56% of survey respondents are still recovering financially from the pandemic.
Economic Pressures Lead Some To Stop Saving for Retirement
“Today’s workers are stuck between a rock and a hard place. They are traversing disruptions in the economy, a tenuous employment market, and the high cost of everyday living—while being expected to self-fund a greater portion of their retirement income compared with prior generations,” according to Catherine Collinson, president of TCRS.
These pressures have pushed many workers to stop saving or to withdraw from their retirement accounts in various ways. According to Transamerica’s survey, 37% have tapped into their retirement funds, such as taking a loan against their retirement balance or taking an early, or even a hardship, withdrawal.
Another survey released in March, by Principal, a financial company, found that 28% of workers have withdrawn money or taken out a loan from their retirement accounts, often to pay for essential expenses like a down payment on a house or to cover a job loss. This is most likely to occur in households earning $200,000 or more annually.
Additionally, the Principal survey found that 39% reduced their monthly contributions and 20% stopped saving for retirement entirely.
Pausing or Withdrawing Funds Doesn’t Always Harm Retirement Accounts
However, not all who shift their financial priorities away from retirement face long-term consequences.
Of those who completely stopped saving for retirement, 78% were able to restart again later, Principal said in its survey report.
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