Tuesday, December 3, 2024
HomeTop StoriesFinancial challenges may reduce retirement savings by up to 37%: study

Financial challenges may reduce retirement savings by up to 37%: study

Published on

Latest articles

Syensqo wins prestigious SPE innovation awards North America 2024

Winning application enhances safety in General Motors’ flagship electric vehicle Syensqo, a global leader in...

Ras Al Khaimah Ruler hosts MoU signing between RAKEZ and China’s Foshan Commerce Bureau

Ras Al Khaimah Ruler hosts MoU signing between RAKEZ and China’s Foshan Commerce Bureau His...

Plast Eurasia Istanbul 2024: Middle East and North Africa’s (MENA) Key Event for Future-proofing Innovation and Sustainability in Plastics

Plast Eurasia Istanbul 2024: Middle East and North Africa’s (MENA) Key Event for Future-proofing...

Alternative Drives as a Aontribution to Decarbonizing the Construction Site

Alternative Drives as a Contribution to Decarbonizing the Construction Site Broad range of e-machines...


Graiki | Moment Open | Getty Images

Life goals and other financial priorities can get in the way of saving for retirement.

Long-term, those competing priorities — dubbed the “financial vortex” — may reduce U.S. workers’ retirement savings by up to 37%, according to new research from Goldman Sachs Asset Management.

That’s even as more U.S. workers — 65% — say they are confident in their ability to meet their retirement savings goals, up from 57% last year, the firm’s July survey of 5,261 U.S. individuals found.

Yet even for the most diligent savers, life events can get in the way of retirement preparedness.

Having to retire earlier than expected at age 62 may reduce total retirement savings by 25%, Goldman Sachs’ research found.

Meanwhile, student loans may result in a 19% reduction in total retirement savings; caregiving may cause an 18% shortfall; early career cash outs pointed to a 16% decline; salary increases that didn’t coincide with proportional retirement savings increases resulted in a 13% reduction; and financial hardships resulted in a 5% decrease.

More from Life Changes:

Here’s a look at other stories offering a financial angle on important lifetime milestones.

For savers who experience multiple such events or factors, it’s “easy to see” how they may suffer a 37% decline in their retirement savings, Chris Cedar, senior retirement strategist at Goldman Sachs said during a recent presentation on the research.

“The reality for retirement savers is that they’re going to have to figure out how to balance some of these real-life impacts more than they’ve had to do so in the past,” Cedar said.

Living better now vs. living better later

With salary increases, the model forecasted for ongoing 3% adjustments as well as seven growth events over the course of a career. That includes 10% for early career increases and 6% for late career.

The potential for a shortfall even with those increases points to the challenge all workers face of accumulating wealth for retirement while also funding their lifestyles today.

“There’s a balance between living better now and living better later,” said John Merrill, president and founder of Tanglewood Total Wealth Management in Houston, which is No. 58 on the CNBC FA 100 list this year.

While events like a divorce, which Merrill calls a “financial wrecker,” may crop up unexpectedly, even planned life milestones like the birth of a child can increase financial pressure.

“The main thing is discipline,” Merrill said. “People who are disciplined with their money, disciplined with their life, really are going to go so much further.”

The best approach is to pay yourself first — including at least 10% of your salary toward retirement and 5% toward an emergency fund — and then spend the rest, he said.

Other experts caution that increasing overall spending as salary and wealth goes up, known as lifestyle creep, should be avoided.

Having a higher cost lifestyle creates two problems, according to Stephen Cohn, a certified financial planner and co-president of Sage Financial Group in West Conshohocken, Pa, which is No. 22 on the CNBC FA 100 list.

First, it makes it more difficult to save for long-term goals including retirement. Then at retirement, savers may find their nest egg falls short of their needs while they’re challenged with making up the income they need to sustain their lifestyle.

Retirement age uncertainty



Source link

More like this

Syensqo wins prestigious SPE innovation awards North America 2024

Winning application enhances safety in General Motors’ flagship electric vehicle Syensqo, a global leader in...

Ras Al Khaimah Ruler hosts MoU signing between RAKEZ and China’s Foshan Commerce Bureau

Ras Al Khaimah Ruler hosts MoU signing between RAKEZ and China’s Foshan Commerce Bureau His...

Plast Eurasia Istanbul 2024: Middle East and North Africa’s (MENA) Key Event for Future-proofing Innovation and Sustainability in Plastics

Plast Eurasia Istanbul 2024: Middle East and North Africa’s (MENA) Key Event for Future-proofing...