With the recession in full force, saving for retirement isn't as easy as it used to be. A new survey from the Bank of America reveals just how severely people have been affected. About 4 in 10 Americans say they will stay in the workforce longer than they expected to because of the economic downturn. Meanwhile, almost 1 in 5 has withdrawn retirement assets prematurely, often to pay off credit card debt and make mortgage payments.
[Read full article: 7 Ways to save for Retirement During a Recession]
Scale back on the Gucci purchases. Six in 10 respondents said they’re spending less than they were three months ago, with 3 in 10 calling their spending “sharply lower.” Affluent consumers—defined as those with $100,000 to $3 million in investable assets—were just as likely to report cutbacks. Those ages 30 through 49 appear to have it worst, with 7 in 10 reporting cutbacks.
Put the money in your piggy bank instead. Even though respondents said they were spending less, they reported saving less, too, which underscores how difficult it is to put money away during tough economic times. About half of survey respondents said they were saving less than they had been three months ago, with 2 in 10 saying they were saving “much less.” Averill says he thinks consumers are putting their cash toward reducing debt and paying for items that have gone up in price, such as food and, until recently, gas. Also, he says, many people are supporting adult children who have recently graduated from college and can’t find jobs.
Don’t expect to hang up your hat at 65. Some 43 percent of survey respondents said the current financial conditions caused them to delay their expected retirement age. Three out of 10 consumers over 50 said they now expect to retire much later than they did a year ago. Others came up with creative solutions for the money crunch: Three in 10 said they have considered working part time after they retire, and 27 percent said they have thought about moving to an area with a lower cost of living.
Don’t let market swings upset your investing strategy. Two thirds of consumers say they haven’t changed the way they save and invest in response to the economic climate, and Averill calls that a good thing. It suggests, he says, that they understand dollar-cost averaging, the concept that if you invest regularly in the market, you’ll fare better than if you try to time its ups and downs. As for whether you should put money into safer investments in light of the volatile stock market, Averill says the answer depends on people’s individual risk tolerance and how many years they have until retirement.
[Read part two here.]