Should job loss or an unexpected medical bill crop up, an emergency fund is a financial lifesaver. Workers and retirees are showing a renewed interest in saving for the unexpected. About 59 percent of workers and 67 percent of retirees have an emergency fund, according to a recent online survey conducted by Harris Interactive and Principal Financial Group. Retirees generally have larger account balances. About 66 percent of retirees say they have over 6 months worth of living expenses earmarked for sudden expenses, compared to 36 percent of current workers. Both percentages are up significantly since 2008, when 54 percent of retirees and 30 percent of workers had enough in the bank to weather 6 months.
Other current workers have between 5 and 6 months worth of expenses tucked away (20 percent), 3 or 4 months (27 percent), 1 or 2 months (16 percent), or less than 1 month (2 percent), the quarterly survey of 1,189 employees and 509 retirees conducted between April 27 and May 6 found . “The unexpected has happened, causing them to shift their focus from instant gratification to long-term financial planning,” says Dan Houston, president of retirement and investor services at the Principal Financial Group. “While hope is on the rise, Americans are still proceeding with caution, as they should." Only about 11 percent of the workers or retirees have had to tap into their emergency fund recently to cover monthly expenses, down from 17 percent in 2008.
To pad their savings, retirees have been cutting back in other ways including preparing meals at home instead of eating out (50 percent), lowering the thermostat (37 percent), wearing old clothes instead of making new purchases (27 percent), shopping at thrift or consignment stores (23 percent), buying in bulk (20 percent), postponing the purchase of a vehicle (20 percent), using the local library for books and videos (16 percent), skipping take out coffee (10 percent), and selling valuable items such as jewelry or artwork (10 percent). Smaller amounts of retirees have been carpooling or taking public transportation (3 percent), postponing the purchase of a home (3 percent), selling one of multiple cars (3 percent), and downsizing housing (2 percent), the survey found. Only about 30 percent of retirees and 21 percent of current employees say they have not cut back in any way recently.
Tell us, have you ramped up your emergency fund?