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Given the current economy and the uncertain political landscape in the USA, It may not surprise anyone that people are having to tighten their belts.
The cost of groceries, education, and healthcare tends to hit the headlines constantly. The cost of retirement is perhaps discussed less often. The result is that those of us being forced to cut back in this area can feel like we’re alone.
In fact we’re in the majority (just). A recent study from Allianz Life indicates that just over half of respondents had either reduced retirement savings, or stopped them altogether in the last six months.
The Allianz Center for the Future of Retirement found that 51% of those surveyed said they’ve stopped or reduced their retirement savings in the past six months, with younger workers far more likely to be in that number. (62% of Gen Z and Millennials compared to 46% of Gen X and 36% of Boomers.)
Even more concerning, 47% reported having to dip into their retirement savings in the past six months. So for almost half of us, our savings aren’t just stagnating. They’re actually diminishing.
The reasons are varied, but include concerns about increasing healthcare premiums, uncertainties about inflation in general — and rising grocery prices in particular — and concerns about various policies such as the burden of tariff policies on American consumers.
If you’re among the 51% cutting back on retirement savings, there are a few things to consider.
Are There Other Areas You Can Cut Back On?
This may seem obvious, but there are dozens if not hundreds of ways to cut back that don’t involve reducing or dipping into retirement saving.
However, retirement savings will often seem like the easiest option, especially for younger workers. You can reduce your contributions, or even withdraw from your retirement savings, and it has no impact on your current lifestyle. Plus you’re far enough away from retirement to think you’ll just make it up later on.
Just remember there’s a reason it’s wise to pay into retirement savings from an early age: the simple concept of compound interest. Saving early means you can generally save less than if you leave it later. Don’t cut back on retirement savings as a first resort. Go over your budget first and at least consider where else you can make savings.
Are You Sacrificing an Employer Match?
There’s a reason many financial gurus will tell you to max out your retirement savings to whatever level your employer will match. That match is, of course, free money. But again, it’s free money you don’t see — and won’t see for a long time — so it seems easy to just let it go.
Go over your retirement accounts and really crunch the numbers to see what you’ll be losing. This may be enough to motivate you to find other ways to save money or increase income.
Are You Worried About ‘Maybes’?
Respondents to the above survey cited a few reasons to reduce or stop paying into retirement saving. They included ‘anticipated premium hikes’ in healthcare insurance and a general low level of confidence that the economy will improve in the coming year, as well as worries about a market correction in the stock market and fears around their own job security.
While these are real fears and valid concerns, it’s also important to be aware that decisions taken due to fear of what might happen in the future are not always the right ones.
The best course of action for any worker considering reducing, stopping, or cashing in retirement savings is probably to talk to a specialised financial advisor. Professional advice can help you get a really clear picture of the pros and cons of adjusting retirement contributions, given your age, income, and goals, as well as your current circumstances and financial options.
About the Author
Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen
Wealthtender is a trusted, independent financial directory and educational resource governed by our strict Editorial Policy, Integrity Standards, and Terms of Use. While we receive compensation from featured professionals (a natural conflict of interest), we always operate with integrity and transparency to earn your trust. Wealthtender is not a client of these providers. ➡️ Find a Local Advisor | 🎯 Find a Specialist Advisor