Higher day-to-day costs have impacted Americans in almost every aspect of their lives, and especially when it comes to their financial wellbeing, according to a new survey by U.S. News & World Report.
The data found half of 2,000 U.S. adults surveyed paused retirement savings in 2022 due to the cost-of-living increase, while 32% withdrew a portion of their retirement savings last year to keep up with rising living costs. Forty-one percent stopped contributing to retirement funds like 401(k)s or individual retirement accounts (IRAs). Those surveyed had been saving for retirement for over five years, with 39% saving for six to 10 years and 61% saving for over 10 years.
The research comes at a time where consumer price indexes were at all-time highs. The consumer price index for all urban consumers (CPI-UC) peaked in June at 9.10%, making the highest increase since 1980 and 1981. And while the latest CPI numbers were 6.3% through December, it may leave some wondering whether their savings will catch up in time for retirement.
U.S. News & World Report attributes the halt in retirement savings to another negative effect brought on by the COVID-19 pandemic. Consumer demand in goods over services, coupled with supply chain issues due to labor shortages, contributed to rising inflation. As consumers look to cut costs, long-term savings strategies for retirement are some of the first pools of money to go.
As a result, the data finds 72% of respondents have since reevaluated their retirement plans, whether that means halting or increasing contributions. Some remained optimistic in the state of the economy come end of 2023, with 57% believing it will be stronger. Yet, 43% say the economy will be at a weaker state. Despite the division, U.S. News & World Report found 61% of participants trust their retirement plans will recover in 2023.
Still, that confidence didn’t stop a majority of the group from expressing fears of a potential recession this year. Eighty-two percent of respondents aired worries of a future recession affecting their retirement plans and savings, and over half (57%) said they’ve lost sleep due to stress over their retirement or life savings. In anticipation for a possible market downturn, and as a response to potential cost-of-living-adjustment (COLA) increases, 65% said they expect to work during retirement to supplement Social Security income.
Additional findings from the survey can be found here.
SEE ALSO:
- Despite Remaining Optimistic, Advisors Report Fears Over Inflation and Investment Returns
- Inflation Moderating, But Will Social Security Recipients Catch Up?
- Americans Remain Confident in Retirement Savings, Despite Market Uncertainty
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
