Inflation battered retirement savings in 2022
New study finds alarming number of Americans scaled back or stopped saving for retirement altogether
According to new data, a year of surging prices for everyday expenses squeezed Americans' budgets to the point of kneecapping an alarming number of U.S. households' retirement savings in 2022,
The TIAA Institute and George Washington University's Global Financial Literacy Excellence Center's latest Personal Finance Index released last week found historically high inflation forced a quarter of Americans to slash their retirement savings and a full 12% to quit saving entirely over the last year, concerning researchers.
"This steep of a drop – on top of a crisis where 40% of Americans already don’t have enough saved for retirement – means many families will have to work even harder to achieve a secure retirement," said Surya Kolluri, head of the TIAA Institute.
Kolluri says the reduction in savings could have lasting effects that will make it more difficult for people to reach the point of being able to survive in their golden years.
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"When somebody reduces how much they save for retirement, it may not be just a one-time cut," he told FOX Business. "Many employers match what their employees save for retirement, so a reduction in an individual's savings will also turn into a reduced matching contribution. It also means missing out of the compounded growth of these amounts."
The study found retirement savings were not the only place Americans said they were falling behind financially.
Nearly one-third (30%) of those surveyed said they found it difficult to make ends meet in 2022, up from 24% in 2021. Some 26% of respondents said they were debt constrained, a six-point rise from the year before, and 39% said they lacked sufficient savings to cover one month of living expenses – a 7-point rise.
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The researchers that led the study say individuals with a very low level of financial literacy are far more likely to report having money woes than those who have a handle on managing personal finances.
People with low financial literacy are twice as likely to cut their retirement savings and more than four times likely to stop saving. They are also more than four times as likely to say they have difficulty making ends meet, three times as likely to report debt stress, and four times as likely to have inadequate non-retirement emergency savings.
While the experts have had concerns over low levels of financial literacy in the U.S. for years, the findings from their 2022 data raised further alarms.
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"Every year we say the findings are troubling, but this year, more than ever, we see how low levels of financial literacy in a volatile economy can lead to problems," said Annamaria Lusardi, GW professor and GFLEC's academic director. "It’s important we focus on helping people of all ages, races and genders, especially the ones who are the most vulnerable."