It’s no secret that high inflation-elevated costs for basic necessities have been devastating to household savings across the nation. Not only have a large majority of Americans been forced to live paycheck-to-paycheck, but according to a Help Advisor survey, over 26% of Americans have had to tap savings, including retirement accounts, just to make ends meet.  

The Survey of Consumer Finances found that as of 2022, as many as 46% of households had no retirement savings accounts at all. Across the nation, saving funds for the average worker has become so difficult that 77% don’t believe they can stash enough away for a secure retirement. Although the overall average family has roughly $40,000 in savings, Gen-X in particular are on the lower range of the scale. 

The National Institute on Retirement Security conducts regular national surveys. Their findings show that between 2020 and 2023, the consensus on the inability of the average worker to save sufficiently for retirement responded as follows:

• Strong agreement increased from 31% to 38%.
• Somewhat agreement increased from 37% to 39%.
• Strong disagreement went down from 7% to 5%.

The Primary Areas of Savings Concern

 

The NIRS poll results categorized respondents’ concerns and policy preferences into five main areas:

• Pensions – 77% of those polled believe that the disappearance of pensions is a detriment to many Americans’ ability to have a secure retirement. 83% believe that all workers should be able to get some type of pension.
• Retirement Anxiety – 79% of polled Americans feel there is a retirement crisis, 12 points higher than in 2020. 73% felt that inflation gave them greater retirement security concerns, while 55% believe they can’t achieve retirement financial security.
• Washington Political Leaders Are Out of Touch and Dropping the Ball – A whopping 87% of responses all believe Washington hasn’t a clue as to the difficulties of saving in the current inflation-laden economic environment (up from 76% in 2020). 86% said Washington needs to prioritize a retirement policy, and 84% responded that legislation is needed to cut red tape to make it easier for companies to offer employee pensions (both up from 76% in 2020).
• Protect Social Security Now, Don’t Wait For 10 Years –  87% of Americans believe the preservation of Social Security is of the utmost importance, and Congress needs to get it done now, not in the next decade.  
• Escalating Long-Term Healthcare and Housing Costs –  As modern medicine extends average lifespans, 80% of respondents expressed grave concerns over long-term nursing care. As inflation continue to spiral costs upwards, even if at a decelerated rate, the higher prices of medicine, tests, and hospital stays will continue to eat into any retirement savings. Additionally, 75% expressed worries over rising housing costs (and commensurate property taxes), as well as even part-time labor costs to help senior citizens with required chores. 

 

No Magic Bullet Remedy, But Tactics, Habits, and Tips

 

Sadly, there are no magical formulas to suddenly create a nest egg. The prudent principles of saving and investing that have been handed down over many generations still hold true. In the modern era, there are a few things one can do in order to create some savings in the modern era:

 

• Cut Debt – Paying off debt is one of the most beneficial tactics one can deploy to start having the means to save funds. Accrued monthly interest eats away at income like termites in an all wood structure. 
• Make a Budget and Stick To It – A large number of people raised in the computer age, i.e., Gen-X and younger, are often unaware of how many hidden fees and charges they pay from digital subscriptions, promotions, autopay and other conveniences. Delineating a budget and then itemizing all monthly expenses will greatly allow one to identify and eliminate many of these unnecessary fees and payment outlays. The discipline developed from foregoing extravagances to stay within a budget will help one to start amassing savings for future investment.
• Invest Whenever Possible – if one has any kind of investments, even if just some mutual fund or ETF shares, reinvestment of dividends and a monthly small percentage of savings can go a long way to building retirement wealth, especially if in a tax-deferred IRA.

 

SECURE Act 2.0 Strategies For Those With Some Savings In Hand

 

Although it was signed in 2022, the SECURE Act 2.0 was legislated to address several obstacles that citizens had experienced in trying to save funds. As a roll-out, not all of its elements initiateded on Day One. Some were phased in over a few months, others on a longer calendar. Below are a few that commenced in 2024:

• Roth 401 (k) RMDs Phased Out – Required Minimum Distributions (RMD) in Roth 401 (k) accounts after age 73 effectively ended at the start of 2024. Thus, the funds can still be invested in growth strategies on a tax-free basis.
• Emergency Withdrawals – SECURE Act 2.0 provides greater flexibility for emergency withdrawals from retirement accounts or employee retirement plan (with employer consent) of up to $1,000 per year without penalty.
• Emergency Employee Savings – middle-tier and lower-wage employees can now create emergency savings accounts through their employers. Up to $2,500 can be contributed and deducted via payroll deductions per employee. The funds are invested in employee plans and can be withdrawn by the employee on a tax-free basis in case of emergencies.

It’s Not Hopeless

Retirement security is certainly a major concern for many baby boomers and a growing concern for Gen-Xers. While the current high prices and economic climate may be dire, there is  hope that new legislation after the November elections will follow soon after. In the meantime, some of the above strategies and tips may provide some guidance until necessary policies are changed. 

 

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