(844) 845-4219 » Impact of Inflation on Retirement Savings

Americans Are So Prepared for Tomorrow, They Aren’t Prepared for Today



Has inflation switched America’s focus from the short-term to the long-term? Most adults are eating out and vacationing less. Some are even delaying having children or paying off debt.

A new study found that 65 percent of Americans are reducing their budgets “to stay on track with their long-term financial goals.” For many people, that means cutting back on vacations and restaurants.

But for others, that means they aren’t saving for emergencies. What they might not realize is that letting your debt grow and your emergency savings trickle won’t actually help when it’s time to retire. And without anything to back you up, one emergency could set your retirement funds back for years.

New York Life, a life insurance group, interviewed over 4,400 Americans. Despite inflation reaching its highest peak in four decades, 7 in 10 adults still expect to retire when they want to.

While it’s great that Americans are cutting their budget to save for retirement, they may not retire on time if they’re bogged down by debt.

Putting your eggs in one basket

The downside to all of this focus on retirement is that almost a quarter of respondents are delaying paying off their debt. Because of inflation, the Federal Reserve raised interest rates. With high interest, leaving your debt untouched is a dangerous game that will only raise your debts and cost you more down the line.

Those with more debt may have to work longer or lose out on monthly income during retirement.

Americans have also decided that in order to grow their retirement funds, they’ll neglect their emergency funds. Ironic considering we’re at the tail end of a pandemic that highlighted the importance of these savings.

Inflation has forced Americans into thinking they have to choose between their emergency and retirement savings – retirement is winning. The average monthly contribution to an emergency savings account has dropped by $243.

Instead of gunning for one or the other, it might be more effective to contribute a smaller amount to both.

Spread out your savings

Emergency savings aren’t the only investment to get kicked to the curb because of inflation. Sixteen percent of respondents said they’re putting off buying a home. A lot of adults don’t even think they’ll ever be able to afford a home.

If they don’t, rent is another factor they’ll have to consider while planning for retirement.

With important goals like emergency funds and homeownership on the table, why are Americans so focused on retirement?

Maybe it’s because they’ve been given more resources for retirement. Survey respondents said they started preparing for retirement because their workplace provided benefits.

Most people said that their employers offer 401(k) plans that match a percentage of contributions and 44 percent said they made contributions so they could reach their employer’s match.

Employer-matched contributions can go a long way when saving up for your retirement, has free resources to help you through the process. Just don’t neglect your emergency savings either, you never know when you might need it.

No matter what kind of debt you have, can help you solve it.

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