People are worn out. They are trying to make it through the stress of the pandemic, a continually volatile market and record inflation. And, for many who are years from retirement, they have decades of work ahead of them.
These younger Americans are in the middle of their working years – those critical saving-for-retirement years. It’s not easy to keep those retirement goals in mind when current finances feel uncertain.
The new 2022 Retirement Risk Readiness study* from Allianz Life found that people who have yet to retire are much more concerned about their financial futures than retirees – particularly after two years of uncertainty with the pandemic.
The big point: People further from retirement feel financially at risk.
The majority of younger Americans (particularly those more than 10 years from retirement) are more afraid of running out of money than death. In the study, 63% of non-retirees said they fear running out of money more than death. Meanwhile, just 46% of retirees had the same fear. All people are saving and investing in the same market. Yet, these younger Americans are much more worried about their financial future.
Actions taken during the pandemic could be one reason they don’t feel secure because, according to the study, non-retired Americans made some financial decisions during the pandemic that left them in a precarious position:
- 34% took cash out of investment accounts like a 401(k) or IRA.
- 39% reduced the amount of money they were putting into retirement accounts.
- 54% said they spent too much on non-necessities.
In general, people should refrain from touching retirement investment accounts until they leave the workforce. They should also maintain contributions to those accounts. But, these moves already happened – an opportunity lost. So, let’s focus on what people can do to address risks to their retirement security, starting today.
Here are some tips to get back, or stay, on track toward retirement goals. The proposed SECURE ACT 2.0 looks like it will pass at the time of this writing, and some of the provisions will help saving for retirement more attractive and affordable for younger pre-retirees.
Get back to basics
Sometimes you have to return to Finance 101. Re-examine your monthly income and expenses. Find out how much you can reasonably save – and then do it. Make a plan to pay off debt, especially high-interest or non-mortgage debt like credit card debt and car loans.
The hardest part about this process is that it involves work and brutal honesty. You have to write everything down – don’t expect you’ll remember everything. This is where commitment begins.
Then, start checking down the list of ways you can …….