Stimulus Checks: Most Americans May Have Messed Up by Not Putting the Extra Money Toward Retirement
During the COVID-19 pandemic, the federal government gave $931 billion directly to individuals in the way of stimulus checks, according to the Government Accountability Office. The stimulus checks were given in an effort to alleviate the financial hardship created by the pandemic and government-issued lockdowns.
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The money was used for a wide variety of things, but few people put it towards retirement. GOBankingRates asked over 1,000 people who received a stimulus check over the past two years how much they saved for retirement. Most respondents — 61.72% — said that they did not put any of their stimulus money toward retirement, and 12.15% said they put less than half of it aside. Less than 9% stated that they put all of the extra money they received into retirement, and only 5.69% responded that they put over half of it into retirement.
In hindsight, it may have been a wise idea to put the money away for your golden years. GOBankingRates asked experts from around the country why most Americans might’ve messed up by not putting the extra money toward retirement. Here is what they said.
The Power of Compounding Interest
Carlos Eduardo, founder and main author of Scorebeyond, who put his stimulus check in his retirement fund, explained, “From my observations and conversations with peers in the business world, I noticed that some people spent their stimulus checks on immediate gratifications like consumer goods, vacations or non-essential purchases.”
He continued, “This decision can be detrimental in the long run, because failing to put extra money toward retirement means missing out on the power of compounding interest. Individuals can benefit from the exponential growth of their savings over time by investing that money wisely in retirement accounts, such as a 401(k) or an IRA. This is especially crucial for entrepreneurs who often have irregular income streams and need to ensure financial security beyond their working years.”
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Small, Consistent Contributions
Eduardo, who is an experienced entrepreneur, said, “In my entrepreneurial journey, I’ve learned that making small, consistent contributions to retirement accounts can lead to substantial wealth accumulation. Even if the stimulus check seems relatively modest, putting it toward retirement can significantly bolster one’s financial resilience in the future.”
He added, “To those who may have overlooked this opportunity, I would strongly advise considering the long-term benefits of redirecting any extra funds toward retirement savings. It’s not just about securing a comfortable retirement but also about harnessing the potential of your money to work for you over time. As an entrepreneur, I know that making strategic financial choices can be the key to a successful and worry-free future.”
Generating Future Growth
Michael Ryan, a financial expert, retired financial planner and founder of Michael Ryan Money, noted, “Most spent stimulus [checks] on immediate expenses — bills, debt, groceries. Financial instability drove short-term thinking. When the stimulus checks arrived, it was a lifeline for many… These immediate needs took the front seat. It’s understandable; financial instability has a way of narrowing our focus.”
He continued, “Few invested in long-term goals like retirement. Compounding returns take time to accumulate. Retirement planning is like planting a tree. The stimulus was like fertile soil, but most missed the chance to sow those seeds. Compounding returns, like the growth of a mighty oak, require time and patience. Not saving was a mistake for retirement security. Stimulus funds could have generated future growth.”
Creating a Comfortable Cushion
“When you put money into a retirement account, it has more time to grow,” said Lynn Toomey, founder of Her Retirement. “So, even a small amount now can turn into a big, comfortable cushion down the road. It’s like planting a money tree that’ll sprout when you need it most.”
She added, “Retirement accounts often come with tax perks. You could reduce your taxable income today and let that money grow tax-deferred until you retire. It’s like having your cake and eating it too!” Toomey also said, “Remember, retirement is like a never-ending weekend — hopefully. You want to make sure you have enough funds to enjoy those golden years. Putting some of that stimulus money aside is a gift to your future self.”
“It’s like building your financial safety net,” she continued. “Life can throw curveballs, and having savings in your retirement account can give you peace of mind, knowing you’re prepared for whatever comes your way. If you wait too long to save for retirement, you’ll have to play catch-up, and that’s no fun. Starting early, even with small amounts, makes the process smoother and less stressful.”
Methodology: GOBankingRates surveyed 1,037 Americans aged 18 and older from across the country between Sept. 5 and Sept. 7, 2023, asking fifteen different questions: (1) How much money do you currently have saved for retirement?; (2) How much money do you think you’ll need in retirement?; (3) How much do you spend or expect to spend monthly during your retirement?; (4) If you aren’t yet retired, how much do you expect to get from Social Security during your retirement?; (5) How much of your retirement do you plan to fund with Social Security?; (6) At what age did you or do you plan to claim Social Security benefits?; (7) Did you or do you think you will have to move to afford your retirement?; (8) Which of the following proposed Social Security solutions do you think would work best to prevent the trust fund from being depleted?; (9) What sources of income will you have in retirement? (Select all that apply); (10) How confident are you that you will have saved enough to afford retirement?; (11) If you retired early, at what age did you retire?; (12) Are you counting on help from your family (financial, housing, long-term care, etc.) to afford retirement?; (13) Do you think retiring around age 65 is financially possible for most Americans?; (14) What worries you financially about retirement? (Select all that apply); and (15) If you got a stimulus check in the last two years, how much of the money did you save for retirement?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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This article originally appeared on GOBankingRates.com: Stimulus Checks: Most Americans May Have Messed Up by Not Putting the Extra Money Toward Retirement
