Roadblocks to retirement: Inflation, student loans put Americans behind in 2023

The recent tumultuous financial environment has left more than half of Americans feeling like they are behind their peers when it comes to saving for retirement. A recent survey of 1,000 U.S. adults conducted by FinanceBuzz found that more than two in five people feel they aren’t earning enough to save for retirement.

The recent resumption of student loan repayments following a 3-year pause due to COVID-19 is also putting the pinch on savers: 54% of the survey’s respondents said they will contribute less to their retirement savings in order to make student loan payments. In addition, 40% of those who responded said inflation has become a roadblock to saving for retirement, and 33% pointed to credit card debt as a barrier to saving for retirement.

Gen X respondents reported feeling the most behind their peers, with 43% saying they feel far behind and 27% saying they feel a little behind in terms of saving for retirement. Gen Z was slightly more optimistic, with about one-third of this age group saying they feel on par with their peers in their retirement savings journey. Millennials were the most confident about their retirement position, with 12% saying they feel far ahead of their peers in saving for retirement.

On average, respondents hope to retire at age 60 but believe they’ll be able to retire at age 65. Broken down by generation, Boomers both hope and expect to retire at age 65; Gen X hopes to retire by age 62 but believe they will retire by age 67; millennials are hoping for retirement at age 58 but think they’ll actually retire at age 64; and Gen Z hopes to retire by age 56 but believes they will retire by age 63.

Saving early is key to achieving retirement goals, but 28% of all respondents said they have not begun saving for retirement, including 44% of Gen Z: 23% of respondents began saving in their 20s, 22% in their 30s, 13% in their 40s, 9% in their 50s and 5% didn’t begin saving until their 60s.

Respondents were also willing to make some significant sacrifices to be able to retire early. The largest percentage of respondents (36%) said they would move to a lower-cost-of-living area to achieve an earlier retirement; 31% said they would spend only on essentials for two years and 30% said they would find a second or third job; and 12% said they’d take a job they know they would hate to be able to retire early.

In addition to saving for retirement as early as possible, FinanceBuzz said investing is a good way to build wealth and budgeting can free up money to go toward retirement savings.

“With employees feeling their budgets squeezed more than usual, it’s going to be crucial that they prioritize long-term retirement health over short-term relief,” said Chris Lewis, head of research at FinanceBuzz. “This may be the first time they feel they have to make short-term sacrifices in their spending, so getting them the education they need about why is going to be crucial.”

For employers, that means exploring what benefits they can offer to employees that will offset potential out-of-pocket costs for their employees that could otherwise go toward retirement as well as re-evaluating current benefits that don’t have a substantial impact on monthly budgets, he said.

Related: Is retiring on $100,000 a year doable? What it takes to get employees there

“Employers need to understand that every dollar counts right now,” said Lewis. “For retirement advisors who can be a little more candid about finances, it’s an important time to be realistic with clients while also not letting them lose focus on their larger retirement goals. There might be short-term pain in people’s pocketbooks, but relieving that hardship by reducing retirement contributions could have devastating consequences down the line. For a lot of employees, this may be the first time they’re navigating financial hardship, so they need someone to reduce the temptations of things like early withdrawals or reducing monthly contributions.”