With no clear end in sight of the economic instability impacting Americans, employees are making adjustments to maintain their long-term financial security.
As Americans shoulder increasing costs for everything from groceries and gas, they’re still focused on protecting their long-term savings to ensure a secure retirement. The majority of Americans (65%) are cutting back on short-term expenses, in order to keep up with their retirement plan contributions, according to a report by insurance company New York Life.
“For those currently retired, inflation risk is very real and will impact both how much retirees can withdraw from their portfolio and their lifestyle in retirement,” Dylan Huang, SVP and head of retirement and wealth management solutions at New York Life, said in a release. “Among those not yet retired, we’re seeing this group making necessary adjustments to their financial strategies, while not allowing short-term anxiety to derail their plans for retirement.”
In April, the Consumer Price Index increased 8.3% from the previous year, according to the most recent data from the Bureau of Labor Statistics. Because inflation impacts an individual’s purchasing power, short-term expenditures often cause the biggest financial pinch. As such, New York Life found that 35% are cutting back on social activities like eating out, and 28% are spending less on travel, in order to maintain or increase their retirement contributions.
While the immediate impact of inflation is hitting Americans hard, a quarter of respondents say they have not changed their long-term financial strategy, according to New York Life. Seventy-two percent still expect to retire as-planned.
Workplace retirement plans are essential to helping employees keep their savings on track: 52% say their company’s 401(k) match contributes to their savings, and 44% contribute additional funds to reach the match. Forty-two percent also utilize an IRA for retirement savings.
“For many Americans, the workplace is their first exposure to retirement savings education,” Huang said. “The help of a trusted financial professional can ensure that your financial strategy can withstand a variety of market conditions, and enables you to achieve your short- and long-term financial goals.”