Inflation big setback for retirement savings
16% of US workers have contributed less to their retirement savings this year
More than half of working U.S. adults feel as though they are behind on retirement savings, underscoring the hardships of the inflated economy, according to a recent report from Bankrate.
Of these adults over a third say they feel "significantly behind," according to the consumer financial services company's recent report.
Industry experts also estimated that this period of hardship won't end anytime soon.
Bankrate's data showed that while 34% of workers are contributing the same amount to their retirement savings, only a quarter of workers have been able to increase their contributions compared to last year.
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Meanwhile, 16% are contributing less than last year as inflation continues to squeeze worker budgets and outstrip pay gains. Additionally, 24% of workers didn't contribute to retirement savings over the past two years, according to the report.
A couple ride their bicycles along Canyon Road, home to dozens of art galleries in Santa Fe, New Mexico. (Robert Alexander/Getty Images / Getty Images)
The report showed that workers who are struggling to contribute more to their retirement accounts "overwhelmingly" blamed inflation, according to Bankrate Chief Financial Analyst Greg McBride.
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McBride noted that with inflation outpacing growth in average hourly earnings, workers have an even more limited capacity to increase retirement savings.
"Generally speaking, American workers are undersaved for both retirement and emergencies," McBride told FOX Business. "An economic downturn could further dent both of those, with unemployment or income disruption sapping emergency savings and some workers tapping retirement savings early due to financial hardship.
An elderly woman pushes a walker along a path in the gardens of the Sewanstrasse senior care home in Lichtenberg district on August 30, 2011. (Sean Gallup/Getty Images / Getty Images)
He noted that this period is "especially damaging" to older workers who are closer to retirement given the fact that "they don’t have as much time left in the workforce to rebuild their nest egg."
On top of that, McBride cautioned that with high inflation and an expected recession, this particularly difficult time to save for retirement will likely continue until at least 2024.
To overcome this challenge, he noted that workers can make pre-tax contributions to a retirement account, which would allow them to contribute a dollar without reducing their net pay by a dollar, "giving you more bang for your buck."
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He added that "getting on track begins with utilizing tax-advantaged retirement accounts such as 401(k)s and IRAs, maximizing the free money that comes from an employer match, and increasing contributions as your pay rises."
Setting up automatic investments via payroll deduction or monthly bank transfers can also help, he added.
"Successful saving is all about the habit and paying yourself first is the way to automate that habit. Waiting until the end of the month and trying to save what is left over means there is often nothing left over and there is no consistency to the amount that is left over for saving," McBride added.