With inflation sky-high, many Americans are cutting back on 401(k) contributions.
Inflation is eating away at our purchasing power. Many of us are stretched too thin even trying to cover basic essentials.
It’s not only forcing us to rethink where we put our money, but it’s also increasing our stress levels about our investments.
A survey by Mercer found that “75% were significantly financially stressed because of inflation and market volatility.”¹
This financial stress is causing many Americans to make mistakes regarding their 401(k) contributions.
A recent study by Allianz Life Insurance of North America found that one of the main ways Americans are dealing with these worries is by cutting back on 401(k) contributions.
Here are some of the findings:
- 54% halted or reduced their 401(k) and other retirement savings between July and September.
- Stressed millennials were the most likely to stop or slim their retirement savings due to inflation (65%), followed by gen xers (59%) and baby boomers (40%).²
Cutting back on 401(k) contributions may relieve some stress right now, but it may cause much more stress later on when you realize you may need to push back your retirement date or miss out on making more money.
We get it might not be possible to keep contributing the same amount as you have been. But if you are cutting back on 401(k) contributions, you should at least continue to contribute enough to get the company match.
If you are looking for ways to avoid cutting back on 401(k) contributions, you’ve come to the right place.
When the market is so volatile, it is tempting to constantly check your 401(k).
This is a mistake.
While we do believe you should stay up to date with your 401(k) and read your statements, obsessing during inflation may lead you to make a rash decision.
When it comes to saving for retirement, you want to treat it like a marathon instead of a sprint. You may feel the urge to sprint when you see the financial loss in your portfolio.
That’s why it is important to stay rational and remember that the market will recover.