Just 1-in-5 American adults have a plan for retirement — yet 62% are confident they’re on track or ahead of their peers, new survey shows. Are they headed for a rude awakening?
Americans are woefully unprepared for retirement, according to a new report by the New York Life Insurance Company.
The survey revealed that many Americans say they’re on track to meet their long-term financial goals, but their actual retirement savings paint a different picture.
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Here’s why many are underestimating their retirement needs.
Underestimating retirement
New York Life’s latest Wealth Watch survey found that most adults are confident in their ability to retire comfortably, with 62% of those surveyed saying they were just as or even more prepared than their peers for retirement.
While this might imply that they had robust savings, only 41% of adults reported having any retirement savings. And a mere 21% say they have a retirement strategy.
It’s difficult to see how so many people can feel so confident about retirement without savings or even a plan. But it is possible they’ve been too preoccupied with their immediate needs to even have time to think about what comes next.
The rising cost of living has been putting serious pressure on American households’ budgets. After hitting a 40-year high in June 2022, inflation receded to 3.2% in February, but it’s still not back to the central bank’s target of 2%.
Feeling pinched, many Americans have sacrificed their savings. As of January, the personal savings rate (what percentage of your disposable income you put towards savings) is just 3.8% according to Federal Reserve data — that’s down from 32% in April 2020.
To cover the gap, households have also been borrowing more. Total U.S. consumer debt was $17.1 trillion at the end of 2023, which is 4.4% higher than the previous year, according to Experian.
There are clear challenges for anyone looking to save more for retirement. However, it’s not impossible. Here are three ways to boost your savings and better position your finances for retirement.
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3 savings strategies
Higher inflation and interest rates are both serious headwinds for anyone looking to save money, but some strategies can help you beat the odds.
Relocating could be an easy way to reshape your financial future. The cost of living varies across the country and in some parts of the country a retirement is much more attainable. Moneywise analyzed all states based on six categories, including cost of living, and found that Florida, South Carolina and North Carolina were some of the best states to retire in. Moving to a location with a lower cost of living in the near future could also help you save even more and make retirement that much more attainable.
Another way to boost your savings is to invest for growth. A Gallup poll found that 61% of Americans own stocks so it’s likely that you’re already invested. But if you’re not, perhaps some exposure to the country’s best companies could help your savings grow faster. The S&P 500 delivered a return of 24% in 2023 — outpacing inflation by a wide margin.
If you’re deep in debt and carrying multiple balances, you might want to consider consolidating your debt to hopefully lower the burden of your monthly payments.
Alternatively, you could seek assistance from friends or family. The number of adults living in multigenerational households has quadrupled since 1971, according to Pew Research. Living together could help younger Americans save on housing costs and help older adults lower the cost of caregivers.
Finally, ask for help from an expert. A professional financial adviser can help you improve your financial situation and work with you to sketch out a plan for your future that you can stick with.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
