By Katabella Roberts
A quarter of American workers had to slash their retirement savings as inflation hit a 40-year high in 2022 and took its toll on their hard-earned dollars, according to new study findings published on April 20.
The findings were reported in an annual study conducted jointly by the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business and the Teachers Insurance and Annuity Association of America (TIAA) Institute.
Approximately 3,503 U.S. adults, ages 18 and older, were surveyed online in January 2023 as part of the study, and data were weighted to be nationally representative.
The TIAA-GFLEC survey found that 25 percent of employed Americans cut their retirement savings in 2022 because of financial pressures created by inflation, and almost half of those (approximately 12 percent) were forced to stop saving entirely.
In addition, Hispanic Americans were impacted the most by the rising cost of living, the study found, and were twice as likely to stop saving altogether, while 40 percent said they saved less.
The findings come after a separate survey by GOBankingRates published in March found that the majority of Americans have less than $50,000 saved for retirement.
‘No Simple Solutions’
That survey found that 27 percent of American workers have between $10,000 and $50,000 saved and 36 percent have less than $10,000 put away, meaning they have barely enough to live comfortably once they retire, despite ongoing fears of a possible recession.
“This steep of a drop—on top of a crisis where 40 percent of Americans already don’t have enough saved for retirement—means many families will have to work even harder to achieve a secure retirement,” said Surya Kolluri, head of the TIAA Institute, in a press release.
“There are no simple solutions to this challenge, but we need to take a holistic approach because health and wealth are two sides of the same coin. It’s just as important to know about someone’s medical condition as it is to know about the health of their retirement savings accounts, and employers need to engage workers on both fronts,” Kolluri added.
Along with struggling to save for retirement, the TIAA-GFLEC survey found that 30 percent of American workers struggled to make ends meet in 2022 as costs rose, marking a 6 percent increase from 2021.
Another 26 percent said they were debt-constrained, up from 20 percent in 2021, and 39 percent said they lacked nonretirement savings sufficient to cover one month of living expenses, up from 32 percent in 2021.
Social Security Funds Facing Crisis
The findings come as both the Biden administration and Republicans have vowed to not make cuts to Social Security amid their ongoing negotiations regarding the debt ceiling.
However, experts including the Social Security Board of Trustees have called on Congress to urgently address the depleting trust funds used to pay for Social Security and warned that up to 20 percent in payment cuts could be seen as early as 2033 if the situation is not resolved.
According to the board, “The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds are projected to become depleted in 2034, one year earlier than projected last year, with 80 percent of benefits payable at that time.”
Meanwhile, the OASI Trust Fund, which pays monthly benefits to retired workers and their spouses and to survivors of deceased insured workers, is “projected to become depleted in 2033, one year sooner than last year’s estimate, with 77 percent of benefits payable at that time.”
Approximately 67 million retired Americans receive Social Security checks every month.
“The trustees continue to recommend that Congress address the projected trust fund shortfalls in a timely fashion to phase in necessary changes gradually,” Kilolo Kijakazi, acting commissioner of Social Security, said in a March statement. “With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”