{"id":9191,"date":"2022-04-03T09:03:41","date_gmt":"2022-04-03T13:03:41","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=9191"},"modified":"2022-04-03T09:04:04","modified_gmt":"2022-04-03T13:04:04","slug":"the-mega-hurdles-stopping-retirement-savings","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=9191","title":{"rendered":"The mega-hurdles stopping retirement savings"},"content":{"rendered":"
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For many Americans, saving for retirement is a luxury.<\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n
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More than one-third of Americans say they\u2019ve never had a retirement account, such as a 401(k) or an Individual Retirement Account (IRA), according to a Bankrate.com survey<\/a>. A Harris Poll survey<\/a> released in December reported that more than a fifth of the more than 2,000 adults canvassed are saving nothing each year for retirement.<\/p>\n

There are two big reasons for the lack of savings \u2014 and one of them is not easily solvable. Many workers don\u2019t have employer-provided retirement accounts, while others simply don\u2019t have anything to save.<\/p>\n

\u201cAccess to a retirement plan is an important driver \u2014 roughly half of American workers don’t have that,\u201d said Craig Copeland, <\/strong>EBRI <\/strong>senior research associate. \u201cMany workers are low-wage workers throughout their careers and really don\u2019t have enough money to save in a retirement plan. They are trying to pay off debts to just make ends meet.\u201d<\/p>\n

No access to an employer’s retirement plan<\/strong><\/h2>\n

Traditional employer-based retirement plans are typically not available for contractors, freelancers, gig economy workers, and part-time workers. <\/strong>And <\/strong>only 42% of small businesses with less than 100 employees offer retirement benefits, according to a LIMRA 2019 study<\/a>.<\/p>\n

READ ON YAHOO MONEY<\/a><\/strong><\/p>\n

\u201cWhy small businesses don\u2019t offer retirement benefits to their employees is pretty straightforward,\u201d said David Deeds, the Schulze Professor of Entrepreneurship at the University of St. Thomas<\/a> in St. Paul. \u201cThey didn\u2019t need to in order to hire and retain employees in the previous labor market, weren\u2019t required to by state or federal governments, and the perceived costs and complexity (real or imagined) of managing retirement benefits kept at least half of small business from offering retirement benefits.\u201d<\/p>\n

Even without a workplace retirement savings plan, those with earned income can still contribute to an IRA, said Greg McBride, chief financial analyst at Bankrate.com.<\/p>\n

\u201cYou can open an IRA with a brokerage, mutual fund company, your bank or credit union in many cases,\u201d he said. \u201cHave an automatic monthly transfer from your checking account into your IRA to automate retirement savings.\u201d<\/p>\n

A handful of states \u2013 Oregon, California, and Illinois \u2013 now offer auto-IRA state-sponsored retirement savings plans to workers without employer-sponsored plans. Other states are considering crafting similar offerings. These state-facilitated programs automatically enroll workers in moderate risk, low-cost retirement savings accounts called auto-IRAs.<\/p>\n

Three-quarters of Americans say they would participate in state-supported retirement programs if offered one in their state, according to a survey <\/a>by the National Institute on Retirement Security, a nonprofit, non-partisan research and education organization.<\/p>\n

\u201cState-sponsored retirement savings plans offer the best chance in the near term to increase the number of Americans with access to payroll deduction retirement savings plans,\u201d wrote David John, deputy director of the Retirement Security Project at the Brookings Institution think tank, Mark Iwry, senior fellow in Economic Studies, and William Gale, director of Brookings\u2019 Retirement Security Project, in \u201cWealth After Work<\/a>,\u201d which explores solutions to help all Americans gain access to retirement savings accounts.<\/p>\n

It\u2019s not a foolproof way to get workers to save. For instance, for the Oregon plan that began in 2017, about one-third of eligible workers opt out<\/a>.<\/p>\n

Nothing to spare<\/strong><\/h2>\n

That brings us to the second reason for not saving for retirement: Lack of funds is the other indisputable roadblock.<\/p>\n

More than a third of those who don\u2019t contribute to retirement plans say it\u2019s because they can\u2019t afford to do so, according to a MagnifyMoney survey<\/a> of more than 1,200 working Americans. And nearly 50% of those with annual income of less than $50,000 said they\u2019ve never had a retirement account, according to the Bankrate report.<\/p>\n

\u201cChoosing between staying afloat, setting aside some short-term savings and student debt payments often prevents Gen Z and younger workers from contributing to retirement,\u201d said Lazetta Rainey Braxton, a financial planner and co-CEO of 2050 Wealth Partners<\/a> in Brooklyn, NY.<\/p>\n

We want to hear from you! Tell us your career questions or concerns by emailing <\/em><\/strong>yahoomoney@yahooinc.com<\/em><\/strong><\/a><\/p>\n

And those who stepped out of the workforce for caregiving duties, especially when caring for aging parents or relatives, \u201coften struggle with ramped up expenses and are left with little to spare to stash away for retirement,\u201d said Shelly-Ann Eweka, a certified financial planner and senior director of financial planning strategy at finance firm TIAA.<\/p>\n

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Debt is also a big blocker.<\/p>\n

Close to half of workers say debt has negatively impacted their ability to save for retirement, according to the EBRI findings. Nearly one-third of Americans\u2019 monthly income on average goes towards paying off debt other than mortgages, according to a 2021 Northwestern Mutual study<\/a>, with 18% saying they\u2019ve delayed saving for retirement because of their debt.<\/p>\n

\u201cPeople aren\u2019t saving because they just have more pressing needs than saving for retirement,\u201d said Laurence Kotlikoff, Boston University economics professor and author of the<\/a> new book, “Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life.”<\/p>\n

\u201cThey don’t have the money. They’ve got to pay for daycare. They’ve got to pay the mortgage,\u201d he said. \u201cThey don’t feel they can contribute to retirement because they’re just too swamped.\u201d<\/p>\n

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\"Yahoo<\/a><\/div>\n<\/header>\n
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\"Kerry<\/a><\/p>\n
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Kerry Hannon<\/a><\/span><\/p>\n
\u00b7<\/span>Senior Columnist<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

Kerry is a Senior Columnist and Senior Reporter at Yahoo Money. Follow her on Twitter<\/em> @kerryhannon<\/em><\/a><\/p>\n

Read the latest personal finance trends and news from Yahoo Money.<\/strong><\/a><\/p>\n

Follow Yahoo Finance on<\/em><\/strong> Twitter<\/em><\/strong><\/a>,<\/em><\/strong> Instagram<\/em><\/strong><\/a>,<\/em><\/strong> YouTube<\/em><\/strong><\/a>,<\/em><\/strong> Facebook<\/em><\/strong><\/a>,<\/em><\/strong> Flipboard<\/em><\/strong><\/a>, and<\/em><\/strong> LinkedI<\/em><\/strong><\/a>n.<\/em><\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n