One-Third of Americans Aren’t Saving For Retirement — Here’s Why, According to Experts
Written by
Yaël Bizouati-Kennedy
Edited by
Molly Sullivan
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Inflation — which is continuing to affect many areas, such as rent and groceries — combined with high rates — which are impacting everything from credit cards to loans and mortgages — have all been taking a toll on Americans’ wallets.
In turn, this has translated into shrinking savings and little left to put toward retirement planning.
Indeed, a new GOBankingRates survey found that more than one-third of Americans are not saving for retirement, with a whopping 39% not putting anything from their salary toward a retirement plan such as a 401(k).
To some experts, this data isn’t particularly surprising and underscores the very real financial challenges Americans are contending with.
“When a large percentage of the U.S. is living paycheck-to-paycheck, it is not surprising that they are not saving for retirement,” said Jay Zigmont, PhD, CFP, founder of Childfree Wealth. “When you are paycheck-to-paycheck, saving for retirement is a luxury you may not be able to afford.”
Wages Not Keeping Up
One of the reasons Americans are not able to save for their retirement is that wages are simply not keeping up with sustained inflation and rising living costs.
“Most people prioritize short-term expenses like groceries, rent/mortgage payments, transportation, child care, or emergency medical expenses over long-term investments like saving for retirement,” said Steve Sexton, CEO of Sexton Advisory Group.
Indeed, although inflation has been on a downward trend — standing at 3.1%, according to the consumer price index (CPI) released Feb. 13 — it remains sticky and makes it harder to pay for day-to-day expenses, leaving less for savings.
Resumption of Student Loan Payments and End of Pandemic Help
Another factor that has put a dent into savings is the resumption of student loan debt payments in October 2023, pushing people already struggling with other expenses over the edge, said Austin Kilgore, analyst at Achieve Center for Consumer Insights.
According to Kilgore, additional factors impending retirement savings include continually increasing costs of medical care, health insurance premiums and higher education.
In addition, government stimulus, which provided an essential financial lifeline to consumers struggling during the pandemic, wound down while consumers began dealing with a historic surge in both inflation and interest rates, he added.
Credit Card Debt
Credit card debt reached new record levels, with balances topping $1.3 trillion in the fourth quarter of 2023, according to a Feb. 6 report from the Federal Reserve Bank of New York. In addition, the report found that credit card delinquencies continued to increase, with 6.36% of credit card debt turning into “serious delinquency” — 90 days or more delinquent.
“With credit card interest rates hovering over 20%, carrying high balances are taking a big bite out of consumer budgets, leaving little room to save money for retirement,” said consumer finance expert Andrea Woroch. “Paying off this debt as fast as possible is crucial to improve your financial well-being.”
Not Having a Fully Funded Emergency Fund
Having a fully funded emergency fund is critical, some experts noted, and not having one can end up being very detrimental to your financial well-being.
“If you’re constantly playing defense with unexpected costs, which in life are inevitable, you’ll never get to an offensive position when it comes to saving for retirement,” said Sexton, adding that this is where your emergency fund comes in handy.
An emergency fund can soften the blow of an unexpected medical expense, house repairs, job loss or any other unforeseen event, without having to impact your retirement savings.
Sexton said to plan to have at least three to six months’ worth of expenses covered in your emergency fund. And while this can sound daunting, starting small — even setting aside $50-$100 per month — can add up over time, he added.
“Store your emergency fund in an easy-to-access high-yield savings account (HYSA) to take advantage of higher interest rates,” he said.
What Can Americans Do To Start Saving or Save More for Retirement?
It’s never too late to start saving and planning for retirement and experts shared a few recommendations that can help you jumpstart the process.
Achieve’s Kilgore recommended employing the concepts inherent in loud budgeting.
“Loud budgeting espouses taking control of your money, prioritizing your needs and being OK expressing so,” he said. “It’s about what budgeting is, at its core: deciding what’s really important to you – what you want to do and have in your life – and allocating your resources (money as well as time) so that those priorities can become realities.”
While Kilgore noted that these principles are nothing new, loud budgeting is empowering people to be OK with saying “no” to themselves or others with no guilt when they make decisions based on their priorities, versus outside forces like advertising, society, whims and peer pressure.
Another tip is to create a budget that you refer to and update. Keep it simple. If you like apps, use a good, easy-to-use, free one, Kilgore said.
Finally, Kilgore said to “just do it when it comes to retirement savings plans.”
“If your employer offers any type of plan, sign up, and set it up so that the full amount you can save comes directly out of your paycheck,” he noted. “Plus, take full advantage of any match your employer offers.
Not doing so is like giving money away, he said. And if you’re self-employed, talk with an accountant about an Individual 401(k) plan or SEP.
“You may not have employer matching funds, but you can automate the savings and get applicable tax breaks,” he added.
More From GOBankingRates
