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As it has become harder to stretch a dollar at the grocery store and at the gas pump, some Americans are retreating from a key long-term goal: retirement savings.
More than half of workers—55%—said they felt they were behind on their retirement savings, a new Bankrate.com survey find.
Only 25% of workers have increased their retirement savings this year compared to last year, according to the survey, which was carried out in September and included 2,312 adults.
About 34% of workers contribute the same amount and 16% save less. In addition, 24% did not contribute to their retirement savings last year and are not saving this year either.
The main reason given by workers for not contributing more is inflation, with 54% of respondents to the Bankrate survey. This was followed by flat or reduced income, 24%; new spending, 24%; debt repayment, 23%; keep extra cash on hand, 22%; and market volatility, 18%. Of the remaining respondents, 7% said they did not want or need to contribute more, while 5% cited other reasons.
The results come as the IRS just announcement of new contribution limits for retirement accounts in 2023. Workers will be able to contribute up to $22,500 into their 401(k) plans, up from $20,500 this year. The limit for Individual Retirement Accounts will increase to $6,500 from $6,000 this year.
Those 50 and older can save even more — an additional $7,500 in 401(k) plans in 2023, up from $6,500 this year, and $1,000 more in Individual Retirement Accounts.
Getting close to these limits can be difficult for some workers.
“The labor market may be very strong, but we’ve seen wages not keeping pace with inflation,” said Greg McBride, chief financial analyst at Bankrate.com.
“Half of the workers who got a raise said it wasn’t enough to meet rising household expenses,” he said.
Separately, a recent LendingClub report found that 63% of Americans live paycheck to paycheck, including nearly half of those earning more than $100,000.
“Being employed is no longer enough for the everyday American,” Anuj Nayar, financial health officer at LendingClub, told CNBC.
Working baby boomers aged 58 to 76 were the most likely to say they feel behind on their retirement savings, at 71%. This was followed by 65% of Gen Xers aged 42-57 who said they needed to catch up.
Younger generations said they are more confident they can maintain their retirement savings, with 46% of millennials saying they are behind and only 30% of Gen Z workers.
The results coincide with a key finding from previous surveys that the first financial regret What Americans have is that they haven’t started saving for retirement soon enough, according to McBride.
“The closer you get to retirement, the more likely you are to say it’s your biggest financial regret,” McBride said.
One of the main reasons older workers feel more remorse is that they have less time left in the labor market, so they have less time to catch up with the savings they have. feel they have missed.
Also, although they plan to work longer, circumstances beyond their control may cut short their career.
The good news is that there are steps workers of all ages can take to boost their retirement confidence, according to McBride.
“Successful saving is a matter of habit,” McBride said.
“The best way to establish this habit and maintain it is to automate your contributions“, he said, through payroll deductions in an employer-sponsored plan or an automatic monthly transfer into something like an IRA.
This way you won’t be tempted to use the money elsewhere.
Moreover, if you do pre-tax contributions$1 saved will not reduce your take home pay by $1.
While younger workers with the longest time horizons have the greatest advantage, it still pays off for those in the middle or late stages of their careers to increase their carryover rates.
Those who continue to invest in this bear market when stock prices are lower hold on to reap the most rewardsaccording to McBride.
“When you look back 10, 15 years from now, you’ll be really glad you persevered in 2022,” he said.