Saving enough for retirement is no easy feat, and a new survey indicates eye-popping inflation is making it much more difficult.
More than half of Americans (54%) say they have cut back on retirement contributions or stopped saving entirely, according to a survey of 1,004 people from insurance company Allianz Life. The grim reality is a direct result of the highest levels of inflation in four decades.
Millennials (65%) were most likely to say they stopped saving or reduced their contributions for retirement due to inflation, compared to 40% of baby boomers and 59% of Gen Xers. (Curiously, some other research indicates that Gen X in particular is prioritizing saving for retirement above expenses like vacations.)
The Allianz Life survey also found that a whopping 80% of respondents are worried about rising inflation and its impact on their purchasing power in the next six months, and 75% are concerned it could hurt their retirement plans.
Saving for retirement amid high inflation
The idea that Americans have trouble saving for retirement isn’t new. According to Northwestern Mutual’s most recent research, Americans anticipate they’ll need a staggering $1.25 million to afford a comfortable retirement.
Most people aren’t anywhere near that amount. For a period during the pandemic, America’s savings rate was soaring, in part due to stimulus checks and the fact that travel, restaurants and other common expenses were mostly off limits. But now the savings boom appears to be over.
Northwestern Mutual data shows that the average retirement savings in America rose from $87,500 in 2020 up to $98,800 in 2021 — before retreating 11%, to $86,869, amid the high inflation and economic turmoil of 2022.
Understandably, people are anxious about how inflation will play out for them in the future. Folks in their 40s and 50s are most concerned of all. Among Gen Xers, 80% say they’re worried that inflation will affect their retirement plans, versus 72% of boomers and 76% of millennials.
Article by Mary Ellen Cagnassola in Money Magazine published Oct. 23, 2022