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Are Retirement Savings Beginning to Feel the Effects of Inflation?
With the threat of long-term inflation now a part of retirement financial planning, and with Social Security’s looming insolvency problem and accompanying uncertainties, the criticality of building that “nest egg” for later years is building steadily. And to make the concerns even more worrisome, the 2023 BankRate retirement survey indicated that well over half of working Americans already believe their progress toward retirement saving goals is lacking.
With this distressing scenario as a backdrop, it’s important to note that “hardship withdrawals” from 401k plans, as well as loans, are trending up as workers deal with the cost of living. Date from Vanguard’s “How America Saves” study points to an upward trend in the use of savings in retirement plans as temporary safety nets to navigate current economic whitewater. While this may be a necessity to stay afloat, it’s important to recognize the long-term implications and the long-term effects of curtailing wealth accumulation for later years. After all, Social Security is not–and was never meant be–a plan that would cover all one’s financial needs in retirement, and the typical rate of income replacement for mid-level retirees is in the 40 percent range.
In a post on theepochtimes.com, Emel Akan provides insights into the impact inflation is having on several families and their struggles to cope with rising costs, highlighting situations where retirement plans are being affected. Check out her post here.