Rising inflation and concerns about a possible recession have forced workers to reconsider investing in pension and savings funds.
Nearly two-thirds of workers reportedly cut premiums for short- and long-term savings since the start of the year, and a third cut premiums 401 (k), blaming U.S. financial instability
A study by Morgan Stanley at Work found that more than a quarter of workers cut their debt payments to cover living costs, while nearly one in six workers cut their savings funds for college.
The report raises concerns about future pension funds hit by the COVID pandemic and US market volatility, with about one-third of Americans reportedly having less than $ 10,000 in their retirement pool.
About 25 percent of workers have already cut their long-term savings and cut back on emergency savings, with nearly a fifth reduced premiums for health savings accounts.
The report also found that stress over money also affected employee productivity and personal life, with nearly three out of four employees reporting that stress has a negative impact on their daily lives.
According to HR leaders who have heard employees express concerns about their finances, almost half are concerned about keeping up with debt payments in the coming year, and two in five express concern about the financial crisis.
Anthony Bunnell, head of the pensions department at Morgan Stanley at Work, suggested that companies could do more to support their employees with their financial problems.
He said: “The figures are clear: workers are struggling to find a balance between long-term savings and immediate needs.
“An often overlooked resource that can change the game, especially in today’s environment, is the financial advisor available through workplace retirement plans – professionals who can help participants achieve positive financial outcomes and ultimately provide peace of mind.”
According to GOBankingRates, about a quarter of Americans reportedly saved only $ 10,000 to $ 50,000 in their retirement funds, and nearly one in ten saved more than $ 350,000.
The data also highlighted the gender gap when it comes to saving for retirement, with 40 percent of women having less than $ 10,000 on their 401 (k) versus 31 percent of men.
According to Brian McDonald, head of Morgan Stanley at Work, the reduced savings are worrying because “more wealth is created in the workplace than anywhere else.
“Employees continue to see the 401 (k) plan as the central thing they think about when they think about benefits at work,” McDonald said. “It has certainly not changed.
“The fact that workers have reduced their 401 (k) premiums year-on-year is worrying as they will lose the ability to make full use of their retirement plans and compound interest that can help them build wealth over time.
“It’s true that setting aside money for long-term goals can be difficult as costs such as rents and tuition go up. Start with the maximum boost you can do – not as much as is allowed, but the most you can do – in your 401k plan. “
The amount you will have to save for retirement depends on your current financial status, what you will live on after you stop working, and how early you plan to retire.
According to Fidelity, saving at least 15 percent of pre-tax income every year should be enough for the average American to retire comfortably.
Remember, the earlier you start saving money for retirement, the lower your annual savings rate may be and the more likely you are to reach retirement age.
If you haven’t started saving for retirement yet, don’t worry. Fidelity suggests that if you start saving at 30, you should aim to save around 18 percent per year. If you start saving at 35, you should save 23 percent a year to retire, with enough money in the bank to stay alive.
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