It’s tough to be a middle-class worker in America, especially when it comes to planning for retirement. As inflation erodes the dollar, nearly half of middle-income earners are finding themselves in a bind, cutting back on their retirement savings or stopping them entirely.
A recent Primerica survey revealed that 46% of these workers are struggling to get their retirement savings on track due to the rising cost of living.
Don’t Miss:
Just look at the numbers. The Consumer Price Index is up 3.4% annually as of April 2024. And it’s not just about prices. Food and housing are also getting more expensive every day. No wonder 67% of middle-income households say their paychecks are not enough to cover basic necessities and 36% have more credit card debt than they have in emergency savings.
The impact of a big cut in retirement contributions is alarming. Missing a $3,000 annual contribution could cost you up to $25,000, assuming a 6% return over 30 years. For participants in 401(k) plans, the hit could be even bigger: 95% of these plans included employer contributions, according to Vanguard’s 2023 report. That means pausing your contributions means losing your savings and what your employer might have contributed, a loss that could double to about $50,000.
See: Number of 401(k) millionaires up 43% since last year — There are three ways to join the club:
Inflation is not only a short-term headache, it’s a long-term threat, especially for those planning on retiring. Even a “moderate” 3% inflation rate can eat away at the purchasing power of a retiree’s savings. If inflation continues to rise, what $1 million can buy today may be only what $744,000 can buy 10 years from now. That’s why it’s important to save and invest in a way that outpaces inflation.
But there may be a silver lining: As inflation starts to subside, people might find some spare cash to put back into retirement accounts. Plus, the Federal Reserve could cut interest rates, making borrowing cheaper and giving households some much-needed breathing room. Still, hope is scarce: Only 21% of people surveyed believe their financial situation will improve in the next year.
Trending: How many Americans do you think will retire safely with $1 million saved? The percentage may surprise you..
What strategies can middle-class workers use to face this uphill battle? First, talking to a financial advisor can help you develop a savings strategy tailored to your individual needs. Also, considering a side hustle might help you have more money for current expenses and retirement savings. And of course, prioritizing savings, maximizing retirement contributions, and diversifying your investments are key steps to realizing your retirement dreams.
Retirement in the United States is undergoing major changes. Traditional pensions are all but gone, and Social Security offers no long-term security. That has left many to turn to 401(k) plans, which are not widely used, even though they are available to most private-sector workers.
Overall, a combination of high inflation, stagnant income growth, and changes to retirement systems make planning for retirement harder than ever for middle-class workers. It’s a challenge, but with smart strategies and a little bit of hope, it can be met head-on.
Read next:
Up your stock market game with Benzinga Pro, the #1 “News and Everything Else” trading tool in the “Active Investor’s Secret Weapon” – Start your 14-day trial now by clicking here.
Want the latest stock analysis from Benzinga?
The article “Study Finds 46% of Middle-Class Workers Stop or Cut Retirement Savings Due to Rising Cost of Living” originally appeared on Benzinga.com.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
#Survey #finds #middleclass #workers #stopped #cut #retirement #savings #due #rising #cost #living