About two-thirds of working Americans who are at least 55 years old said they plan to delay retirement or are unsure whether they can retire when they want, according to an Axios-Ipsos poll. Out of those, the majority (70%) said they believe they won’t be able to retire because they can’t or wouldn’t be able to afford it.
Many Americans have turned to retirement accounts like 401(k) plans, 403(b) plans and individual retirement accounts (IRA)s to plan for retirement, according to the survey.
“Financial worries are the main reasons people feel they can’t retire,” Axios said in its poll report. “When it comes to how Americans finance retirement, few feel Social Security will cover most of their expenses. Instead, most Americans—both retired and those who aren’t—look to retirement accounts to finance this life stage.
But economic conditions could also be hindering workers from maximizing their retirement savings. Forty-four percent of those non-retired and aged 55 or over said they have had to change retirement strategies due to economic factors beyond their control.
In addition, workers preparing for retirement are worried whether they’d save effectively in a time of stubborn inflation, high interest rates and a volatile stock market, according to a survey by Ubiquity.
“The economy was a worry due to the volatility of macroeconomic forces like inflation and recession, and the resulting impacts on the stock markets and investment performance,” Ubiquity said.
But regardless of market conditions, experts suggest it’s important to keep saving for retirement and to take advantage of legislation designed to improve the retirement plan system.
“Americans have experienced some tumultuous years, but through Congress’ investment in retirement savings through the Secure Act of 2019, as well as individuals’ continued commitment to save, we are optimistic for the future of retirement security,” Kevin Barry, Fidelity Investments president of workplace investing, said in a post. And despite the current state of the economy, retirement account balances increased in the first quarter of 2023 for the second consecutive quarter, according to Fidelity.
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Americans have record debt
Total household debt reached a record $17.05 trillion in the first quarter of 2023, according to data by the New York Fed. That represented an increase of $148 billion quarter-over-quarter. At the end of the first quarter, Americans’ debt balances reached $2.9 trillion above where they stood at the end 2019, right before the COVID-19 recession.
In particular, credit card balances reached $986 billion, the NY Fed said. However, many Americans use these products to manage their finances in a time of economic volatility.
“Credit cards are one of the most common financial products in our country, providing the bulk of short-term credit for families,” the CFPB said in a post. “Interest rates on credit cards have risen substantially, with average interest rates going over 20%. Given the trends for the 175 million Americans with credit cards, the CFPB estimates that outstanding credit card debt may continue to set records and could even hit $1 trillion.
And many Americans continue taking on new credit card debt.
“Bankcard balances and originations continue to climb as consumers seek ways to cope with inflation, and this is particularly the case among Gen Z consumers, who have seen growth of 19% in originations YoY and 64% in balances over the same period,” TransUnion said in a post.
Any increase to interest rates by the Federal Reserve could have an impact on what consumers pay on products like credit cards.
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Is the country heading toward recession?
After the Fed held its June meeting, Fed Chair Jerome Powell told reporters that the central bank could raise interest rates again this year in order to bring inflation down to its target range.
“Looking ahead, nearly all Committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2 percent over time,” Powell said at a press conference. “And I will have more to say about monetary policy after briefly reviewing economic developments.”
While there’s no official definition of recession, many economists characterize it as a period of economic downturn following two consecutive periods of decline in gross domestic product (GDP). But GDP increased at an annual rate of 2% in the first quarter of 2023, according to the Bureau of Economic Analysis (BEA). And GDP increased by 2.6% in the final quarter of 2022. In addition, the unemployment rate increased by 0.3 percentage points to 3.7%.
Slow job growth and an increase in unemployment could be signs that the Fed is meeting its goals. But it may remain aggressive in terms of monetary policy, despite a recent slowdown in inflation.
“CPI inflation slowed to 3% in June, but don’t expect the Fed to stop raising rates,” Morning Consult Chief Economist John Leer said. “The Fed cares primarily about the trend in core PCE inflation, which has been persistently elevated for the past six months,” Morning Consult Chief Economist John Leer said in a statement. “One month of encouraging CPI data isn’t enough for the Fed to make a dovish pivot, particularly as it seeks to maintain credibility with financial markets.”
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