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Money Matters Thought Leadership

Think now’s the time to cut back on retirement savings? Think again

A challenging economy doesn’t mean you should stop saving for retirement

Inflation is at a 40-year high, the stock market is down, and middle-income Americans are finding their income is falling behind the cost of living. 

In the current economy, it’s OK to cut back or stop contributing to your retirement savings, right? 

Wrong.

For most families, the answer to what you should do about your retirement savings right now is simple: don’t panic and stay the course.

In fact, decreasing your retirement contribution is generally a bad idea, says Primerica PFS Investments CEO Estee Faranda.

“For most people, now is not the time to be cutting what you’re investing in the market,” she says. “When the market is down, your dollar buys more. Over time, you may very likely end up buying more shares at lower prices — you end up getting a discount.”

Fortunately, Primerica’s most recent quarterly survey of middle-income households across the U.S. found that a majority of respondents (55%) plan to keep their retirement contributions at the same level this year.

But the temptation to pull back is very real right now for many Americans. Nearly a quarter (24%) of survey respondents said they’ll likely put less money into their retirement account this year due to the economy. Plus, 14% said they will spend at least some of their retirement savings.

Faranda understands the impulse, but “if possible, and it’s very often possible, retirement savings need to be prioritized,” she says. 

“It ultimately comes down to budgeting and taking a hard look at your finances. What is coming in and what is going out — that’s where it all starts. And then making some decisions about what’s going to go into what bucket, particularly those that will strengthen your future financial situation.”

Budgeting is even more crucial now, as Primerica’s latest survey found 75% of currently employed middle-income Americans don’t think they have enough saved to retire comfortably, up 10 percentage points from March. Plus, more than two-fifths (42%) say they now plan to work longer before retirement.

But tackling the problem can be as simple as setting up an automated, monthly contribution to your retirement account — and then not thinking about it. “If you don’t see it; you don’t spend it. Your savings then has the opportunity to compound over time, and the work is done for you,” Faranda says. 

Ready to do more to secure your financial future? Here are a few more steps you can take.

  • Educate yourself. Unfortunately, many Americans lack a solid education in personal finances, including how to save for retirement. And it’s not all that complicated once you understand the basics. “Once you educate yourself on your options, you will feel empowered to do something about your retirement savings,” Faranda says. 
  • Reach out to a financial expert. You don’t have to become fully educated on your own, however. Financial experts are a great asset in any economy but can be particularly helpful when things start to go sideways. And you’re not alone if you feel the need to seek out advice: Only a quarter (26%) of respondents to Primerica’s latest survey said they were very confident they can make sound financial decisions without outside help.
  • Don’t let emotions take over. Investing can be very emotional. It’s harder emotionally and psychologically to cope with a decrease in value than it is to enjoy an increase in value. But this is where cooler heads really need to prevail. “You want to monitor your retirement savings but not obsess over it,” Faranda says.

 

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