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59% of Americans say they’ll 'never catch up to where they need to be' on retirement savings: Here’s what's holding them back

"Embracing the right financial habits" can put you back on track for retirement, experts say.

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Rising debt and housing costs were already weighing on Americans' ability to save for retirement — and the pandemic made things even harder. Facing job losses, increased health-care costs, and unexpected family and caregiving obligations, many people weren't able to scrape up enough cash to contribute to their retirement savings. Some even had to withdraw money from their accounts.

In a new poll of more than 2,000 Americans, MagnifyMoney found that nearly 60% of respondents think they'll "never catch up to where they need to be" when it comes to saving enough for retirement. Nearly half of people with a retirement account said they either stopped saving or decreased contributions during Covid, while 39% withdrew or borrowed from their accounts to cover necessities.

"It's natural to assume that the longer one has been working, the more money they will have," says Jonathan I. Shenkman, an accredited investment fiduciary and financial advisor at Oppenheimer & Co. But "there are plenty of investors who've worked for decades and are woefully unprepared."

Retirement roadblocks: Not enough income, too much debt

Making smart money moves can be hard when you don't have a lot of income coming in, or when you're facing high student or credit-card debt. When asked what barriers were standing between them and a bigger retirement fund, almost 30% of people in the survey said they didn't earn enough to make their contribution goals. And 15% said too much debt hurt their plans.

The Covid crisis didn't help, either: More than one-tenth, 11%, had to use money they would have saved for retirement to cover emergency expenses, while 8% had to help out a loved one financially. (Respondents could choose multiple options, meaning some people likely faced more than one obstacle.)

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A quarter of survey respondents said that they'd have to retire later than they were planning to pre-pandemic, including 42% of those who lost income due to Covid. Younger savers were the most likely to say they'll have to put off retirement. A quarter of Gen Zers (ages 18 to 24) and just under a third of millennials (25 to 40) and Gen Xers (41 to 55) said the crisis would delay their plans. Meanwhile, only 11% of baby boomers (56 to 75) said the same.

That said, Covid wasn't the only factor at play. About two-thirds, 64%, of respondents say their retirement savings weren't where they wanted them to be before the pandemic hit.

Age also affects how much Americans have saved: Here's a look at how much each generation currently has in its retirement accounts.

How to get your retirement savings back on track

It's clear that saving for retirement is still a priority for Americans. More than three-quarters of people (77%) surveyed by MagnifyMoney say they at least somewhat regret withdrawing or borrowing from their retirement savings. Seventy-four percent are working on replenishing their accounts.

Securing a comfortable future typically means saving as much as you can, as early as you can, experts say. But regardless of your age, there are strategies to get back on track if your finances need a boost.

Focus on your workplace retirement accounts, and try to save at least 15% of your monthly income in a 401(k), Roth IRA, or traditional IRA. Even if you can't spare that, any contribution can help, thanks to the power of compound interest.

Take the example of a 25-year-old earning $50,000 a year at a company with a 5% employer match. If she contributes 3% of her salary and scales up to 10% as she earns more, she'd have $1.4 million by 65, according to J.P. Morgan data. That's assuming 2% annual wage growth and a 5.75% annualized return on investment after fees.

If you're older, the key to getting back on track for retirement is regaining focus and keeping things simple when it comes to investments, says Shenkman. "In a 401(k), this may mean opting for a target date fund to seamlessly manage your investments according to your age and time horizon. For investments held outside your 401(k), it means sticking to stocks, bonds, and cash as the core portion of your portfolio. Anything more exotic shouldn't make up more than 5% of your investment strategy."

Increasing income and cutting costs can help, too. Pick up a side hustle if you can, and put anything extra you earn into savings, says Dorothy E. Bossung, a certified financial planner and executive vice president of Lowery Asset Consulting.

"Cut back on unnecessary expenses, [and] pay off your credit cards," she adds. "You don't want to have to borrow if something unexpected occurs."

To get your retirement plan in order, start by "running through your budget and your forecast of expenses," Bossung says. Even if you find you need to "work a bit longer in your current job or seek part-time employment in retirement to afford everything you want," don't think you can't reach your goal, she adds. Understanding your money is the first step to making "financial decisions that are uniquely right for you."

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