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.
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