Economic conditions have shrunk American savings accounts, kicking the goal line for retirement further down the road.
Approximately 70% of Americans intend to retire, but more than 40% lack the savings to support such a decision, according to a new study by Prudential, a financial planning services company.
To conduct its study, Prudential partnered with OnePoll to survey 2,000 adults across generations. The goal of the survey was to better understand the level of financial literacy Americans possess ahead of retirement.
The study’s results were less than encouraging, with Brad Hearn, president of retail advice and solutions at Prudential, calling Americans’ financial literacy “alarming.”
“While more than 1 out of 4 respondents (26%) said they don’t have a strong understanding of what to do when it comes to retirement planning, that reasonable data point becomes more alarming after some additional digging,” Hearn said in the study’s report.
What the study found was that 59% of Americans didn’t have a 401(k), of the people that did have a 401(k), 21% didn’t know how much money they had in it, and 65% lacked a rudimentary knowledge of what an IRA is. Hearn explained that this was particularly problematic given that a 401(k) is “one of the primary savings vehicles for retirement.”
Prudential’s study concluded that lack of timing and knowledge were two of the key factors impairing Americans’ retirement decisions and leading to financial stress.
With macroeconomic conditions pushing prices higher and depleting savings accounts, Dave Lewis, CEO of Operations Inc., suggests that reaching one’s retirement goals will be more difficult than ever.
“Take a look at how much it costs to rent an apartment right now in New York City,” said Lewis to Fox 4 News.
Like rent, Lewis says the soaring costs of goods and services in America have led to a sharp reduction in the amount of discretionary income traditionally set aside for 401(k)s and other retirement accounts.