In the U.S., we’ve long had a retirement crisis – meaning that most Americans can’t adequately save for their golden years. With time, this crisis is getting worse. According to the National Council on Aging, 90% of older households saw decreases in income and net value of wealth between 2014 and 2016. A new survey from New York Life Insurance Company found that 36% of adults today feel less prepared for retirement than their parents. Why is this?
Feeling Alone/Lack of Support
Though there are some safety nets offered for U.S. retirees – most notably Social Security and Medicare – none of these can cover a comfortable retirement and there’s no eternal guarantee that they’ll be sufficiently in place for all future generations. With a shortage of government provisions and a lack of overall support, it’s no wonder that 44% of Americans feel they’re “doing it alone.” What’s more, too few Americans enlist the help of a financial advisor. On top of that, financial literacy is not commonly taught, so people have to seek an education on their own, usually once they’re already grown, if ever.
Seventy-eight percent of adults say their ability to save for retirement has been negatively impacted, and 47% of that number cite current inflation as a top reason. Though inflation has been cooling, it hasn’t entirely resolved and Americans are being deeply affected – with many still living paycheck to paycheck because of it.
An emergency fund should be a pillar in your budget, but many Americans are blindsided by unexpected expenses. The survey found that of the 78% who said that their ability to save for retirement has been negatively impacted, 36% cite unexpected expenses as a hindrance. The majority of consumers aren’t even ready to cover a $1,000 surprise expense.
Twenty-six percent of the 78% of respondents who said that their ability to save for retirement has been negatively impacted named health issues as a top reason. According to a survey by Regions Next Step, a financial educational program designed by Regions Bank, 35% of those polled have medical debt, and the vast majority (82%) are struggling to pay it down.
“The data confirm [sic] what we know pre-retirees are experiencing,” said Suzanne Schmitt, head of Financial Wellness at New York Life. “As traditional retirement savings and income vehicles come under pressure or become unavailable, people are feeling anxious and many also feel unprepared. That effect is compounded by inflation and unexpected expenses, which have made saving for retirement even harder, and that’s before we factor in caregiving, rising healthcare costs, and potential long-term care needs.”
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