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Saving forretirementis challenging.
Money pros say the retirement savings slowdown comes down to priorities.
With high inflation causing low buying power, people must spend more money on necessities.
The experts get it.
Money personality Rachel Cruze recently shared avideoon the topic via her YouTube channel.
Less than half of low-income workers fewer than 25% in some states have the same access.
Part of the issue is the lack of an employer mandate to offer such plans.
In countries that automatically opt workers into retirement savings plans, participation is as high as 80%.
Given that the option to emigrate isnt universal either, most Americans are on their own.
The vast majority of plans offer employer contributions.
When considering a job offer, considerretirement plan contributionsand matching policies.
Cruze recommended investing the maximum allowed in an employer-matched plan to get the biggest benefits.
Theres also the option of a Roth IRA, which you dont need an employer to open.
However, it grows tax-free because youve already paid taxes on that money.
You also dont pay taxes on withdrawals in retirement, assuming you meet the age requirement of 59 1/2.
Roth IRAs havemaximum yearly contributionsthat depend on your age group.
Cruze suggested other investments, such as a mutual or index fund, if you want to save more.
Non-retirement investments dont have the same annual maximums, but the tax rules differ.
Talk to a financial advisor if you have questions.
Saving Requires Discipline
Personal responsibility plays a significant part in American retirement planning.
Cruze said people drag their feet, costing themselves money in the long run.
Retirement savings benefit from compound interest, which builds on itself.
Shorter-term needs or wants can make people question whether they can afford to save.
Solution: Stick To a Plan
Cruze said the best strategy is to just do it.
Commit to a savings strategy and keep at it.
However, she cautioned that it doesnt mean setting and forgetting it.
Putting money into a retirement account is only step one.
You must choose your investment types, watch the results and change things if necessary.
You dont have to commit to depositing a certain amount.
You dont experience the anxiety of withdrawing money from your checking account.
People Need Money Now
Many retirement plans have early-access options, andtough financial timesmean more people take advantage.
In 2023, 3.6% of Vanguard participants took hardship withdrawals, compared to 2.8% in 2022.
Cruze called this phenomenon leakage because it drains money from your total savings.
You end up spending money that would otherwise grow and build on itself.
You could miss out on years of compound interest depending on how early you withdraw.
Your financial services provider may also charge an early withdrawal fee.
Solution: Build a Separate Emergency Fund
Hardships happen.
If you dont have that much available, save up month by month.
When youve reached your goal, consider putting that monthly amount into your retirement or investment accounts instead.
Having an emergency fund gives you the cushion to keep your retirement account as a long-term investment.
The longer you let it sit, the more it can grow.
Cruzes No.
Advisors understand the industry and the many options available to investors.
They can, as Cruze put it, Tell your money what to do.
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