It seems that the new year is bringing along higher expenses for many Americans. The escalating cost of living has left some individuals worried about their ability to save for a comfortable retirement.
A recent study conducted by Allianz Life Insurance Company of North America reveals that the stress levels of four in 10 Americans were higher at the end of 2023 compared to the previous year. This marks an increase from the approximately one-third of people who felt similarly in 2022.
Various factors contribute to this increased stress, including day-to-day expenses, low income (including retirement income), overbearing debt, and inflation. In fact, a staggering 69% of Americans expressed concerns that the rising cost of living would negatively impact their retirement savings.
To obtain these insights, Allianz gathered responses from over 1,000 American participants aged 18 years and older. The findings shed light on the economic challenges faced by individuals across the country.
Another significant roadblock identified in the study was student debt repayment. Many respondents who were making student loan payments revealed that they had either cut or would need to cut their retirement contributions as a result. This further adds to the overall financial strain experienced by Americans.
These findings highlight the urgent need for effective strategies to address the rising cost of living and its impact on retirement savings. It is crucial for individuals to explore alternative approaches that can help alleviate financial burdens and ensure a secure future.
As we navigate the complexities of the current economic landscape, it is essential to prioritize financial planning and seek expert guidance to overcome these challenges and achieve our long-term retirement goals.
Balancing Student Debt and Retirement Savings
Student debt can often act as a roadblock to saving for retirement. However, experts suggest that individuals should try to strike a balance between their long-term savings goals and their loan repayment plans. By making small recurring contributions towards future goals, such as retirement, individuals can take advantage of compound interest. This concept allows contributions, interest, or investment returns to grow exponentially over time, leading to a larger nest egg in the future.
It’s important to note that workers with employer-provided retirement accounts, like a 401(k) plan, may miss out on potential employer matches if they stop contributing. Therefore, even minimal contributions are better than none at all, according to financial advisers.
Retirement Resolutions for the New Year
A substantial number of respondents revealed that retirement was at the forefront of their minds, with plans to retire sometime in the upcoming year. Among their resolutions, downsizing current spending emerged as a popular strategy. Additionally, many expressed the desire to utilize a financial product that offers protection against market volatility. Lastly, creating a comprehensive plan to combat rising costs of living was another priority for these individuals.
By proactively addressing both student debt and retirement savings, individuals can work towards securing a financially stable future while also managing present obligations.
Prioritizing Savings to Combat Inflation
In order to combat the impact of inflation on daily expenses, financial experts suggest that savers need to make it a priority. Andrew Herzog, a certified financial planner and associate wealth manager at The Watchman Group, emphasizes the importance of balancing current expenses with future financial security. While indulging in streaming subscriptions or purchasing a new car may seem enticing, it is crucial to ensure that these expenses do not jeopardize long-term financial stability.
Setting Up Automatic Transfers Into Savings
For individuals concerned about the rising costs of living, Herzog recommends establishing automatic transfers into savings accounts as a proactive measure. By doing so, money is set aside before it can be spent on discretionary purchases. This method ensures that saving becomes a regular habit, protecting against future financial uncertainties.
Reordering Spending in the New Year
The start of a new year presents an opportune time to reassess spending habits. Herzog encourages individuals to adopt the age-old principle of “paying yourself first.” By prioritizing saving for both short-term and long-term goals, one cultivates the habits of self-control and sacrifice. This mindset shift is crucial in achieving responsible financial behavior. Being mindful of expenditure does not equate to being cheap; rather, it demonstrates a sense of responsibility towards one’s financial well-being.
