A recent survey by the American Association of Retired Persons (AARP) indicates that a significant portion of Americans are concerned about their financial readiness for retirement. The survey revealed that 61% of Americans worry about having insufficient savings to live comfortably after retiring.
On the other hand, 40% of men and 30% of women believe they are on track with their retirement savings. However, confidence among men is decreasing, with 42% now rating their financial situation as fair or poor, up from 34% at the beginning of 2022.
Alarmingly, the survey also found that 20% of Americans in their 50s have no retirement savings at all, and 26% of those who are not yet retired do not anticipate ever being able to retire.
Inflation’s Impact on Retirement Savings
Inflation has emerged as the primary obstacle preventing Americans from saving and investing for retirement. “Every adult in America deserves to retire with dignity and financial security. Yet far too many people lack access to retirement savings options, and rising prices are making it increasingly difficult for people to choose when to retire,” commented a senior vice president of research at AARP. “Everyday expenses continue to be the biggest barrier to saving for retirement, with some older Americans expressing doubt that they will ever retire.”
In fact, 70% of Americans are concerned about prices increasing faster than their income. Additionally, 37% worry about covering basic expenses like food and housing, and 26% are anxious about affording caregiving costs.
Moreover, many struggle with paying down credit card debt, let alone saving for retirement. The survey showed that 30% of older adults carry a credit card balance of $10,000 or more, while 12% carry $20,000 or more—a figure that has risen from 8% just a year ago.
However, 33% of respondents remain optimistic that their finances will improve within the next 12 months, possibly due to hopes of inflation decreasing.
Lack of Workplace Retirement Plans
Another significant barrier to retirement savings is the lack of access to workplace retirement plans like 401(k)s. AARP highlighted that Americans are 15 times more likely to save for retirement if they have access to a workplace plan.
Currently, approximately 57 million people in the U.S. do not have access to a retirement plan through their employer, and AARP is advocating for change.
“America is facing a serious retirement crisis. AARP has long supported legislation to expand access to retirement savings, but Congress must act more swiftly to provide the financial support older Americans need and deserve,” stated an executive vice president at AARP.
Several bills pending in Congress aim to address this issue. The Retirement Savings for Americans Act of 2023 would offer retirement savings accounts to eligible full- and part-time workers who lack employer-sponsored retirement plans. Another proposal, the Automatic IRA Act of 2024, would require employers with more than 10 employees to automatically enroll their workers in individual retirement accounts (IRAs) or other automatic contribution plans like 401(k)s. Smaller employers would qualify for an auto-IRA tax credit to offset the costs.
Auto-IRA programs are already in place in eight states, including California, Colorado, Connecticut, Illinois, Maine, Maryland, Oregon, and Virginia, with Massachusetts offering a multi-employer plan. Additionally, 10 other states are in various stages of implementing similar programs.
“We have collaborated with 19 states to establish programs that facilitate retirement savings for individuals whose employers don’t offer retirement plans, but about two-thirds of states have yet to take action, and we are still awaiting federal government intervention,” the AARP executive added.