More than half of American workers say they’re behind on their retirement savings, according to a Bankrate.com survey.
What is worse, the accounts of many have been moving in the wrong direction as workers take early withdrawals from their retirement plans because of the COVID-19 pandemic.
The survey reports that a full 52% of American workers say their retirement savings are not where they need to be. A further 16% are not sure whether they’re on track, while 21% say they’re where they need to be. Only 11% said they were ahead of plan.
Americans have raided their retirement accounts to stay afloat, too, the survey pointed out. Of those with accounts such as a 401(k) plan or an IRA, 51% have taken an early withdrawal, including 20% who have taken one since the pandemic began in early 2020.
Other findings of the survey include:
About 63% of Americans are saving as much or more than they were before the pandemic.
More than one-third of Americans don’t have a retirement account.
Older generations of Americans were more likely to feel behind on retirement savings than others.
Lower-income households were more likely to say they’re behind in saving, but higher-income households weren’t much better.
Almost 16% said they don’t know where they stand.
Nearly 60% of Generation X said they were behind.
More than 56% of baby boomers said they felt behind schedule.
More than 49% of millennials said they were behind plan.
Just 33% of Generation Z said they had fallen behind.
Saving As Much (Or More)
Despite the dour numbers of Americans admitting that they are behind schedule, many workers said they’ve been saving as much or more since the pandemic began.
Here is how the numbers break down:
• Almost 39% said they’re saving about the same amount for retirement as they did before the pandemic.
• More than 24% said they’re saving more now than they did before.
• Nearly 14% said they’re saving less for retirement than before.
• Around 23% said they weren’t contributing before or now.
Why Workers Said They Are Saving Less
The reasons participants gave for saving less varied, but lack of income was cited by the highest number of participants, the survey reported. Respondents could choose more than one answer in the survey, and here are the most cited reasons they gave for saving less:
• Loss of income (49%)
• Additional expenses (32%)
• Additional debt (21%)
• Wanting to keep more cash on hand (19%)
• Helping other adult family members financially (14%)
• 9% said none of these
• 5% pointed to some other reason
Americans are behind in their retirement savings because they do not save enough, noted Greg McBride, chief financial analyst with Bankrate. Early withdrawal from your retirement plan will also put you behind.
“Saving for both emergencies and retirement is vitally important to current and future financial security,” McBride said. “Even a modest emergency fund acts as a buffer from early retirement account withdrawals when unplanned expenses arise, allowing the power of compounding to continue to work its magic.”
To help Americans save more for retirement, financial advisors should educate them, especially those without retirement plans, about options they have for saving for retirement, such as IRAs, McBride said. Many people do not save for retirement because they do not have a retirement account.
“Make them aware of the options they have to save for retirement on a tax-advantaged basis,” he added.
McBride’s advice for consumers who want to save more for retirement is straightforward and to the point:
Pay yourself first.
Have an emergency fund.
Bankrate.com commissioned YouGov to conduct the online survey. All figures, unless otherwise stated, are from YouGov. Total sample size was 2,225 adults. Fieldwork was undertaken from October 20-22, 2021.
Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as Editor-In-Chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]