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Rising inflation and concerns about a possible recession have forced employees to reconsider investing in their retirement funds and savings.
Almost two-thirds of employees have reportedly reduced their short and long-term savings contributions since the start of the year, with a third having reduced their 401(k) contributions, blaming financial instability in the U.S.
A study by Morgan Stanley at Work showed that over a quarter of workers have cut down on their debt repayments to afford the cost of living rises, while almost one in six employees cut back on their college savings funds.
The report sparks concern for future retirement funds which have taken a hit following the COVID pandemic and the instability of the U.S. market, with around a third of Americans reportedly having less than $10,000 in their retirement pot.
Around 25 percent of workers have already reduced their long-term savings and scaled back emergency savings, with just under one in five whittling down contributions to health savings accounts.
The report also showed that money-related stress has also affected workers' productivity and personal lives, with almost three in four workers reporting stress as having a negative effect on their everyday lives.
According to HR leaders who have heard employees express concerns about their finances, almost half are worried about keeping up with their debt repayments over the coming year, with two in five expressing their unease with the financial crisis.
Anthony Bunnell, head of retirement at Morgan Stanley at Work, suggested that companies could be doing more to support their staff with their financial concerns.
He said: "The data is clear: Employees are struggling to find a balance between long-term savings and immediate needs.
"One often overlooked resource that can change the game, especially in today's environment, is the Financial Advisor available through workplace retirement plans—professionals who can help set participants up for positive financial outcomes, and ultimately deliver some peace of mind."
Around a quarter of Americans have reportedly only saved between $10,000 and $50,000 in their retirement funds, with just under one in 10 having saved over $350,000, according to data from GOBankingRates.
The data also highlighted the discrepancy between men and women when it comes to saving for their retirements, as 40 percent of women have less than $10,000 in their 401(k) compared to 31 percent of men.
According to Brian McDonald, the head of Morgan Stanley at Work, the reduced savings is concerning, as "more wealth is being created in the workplace than anywhere else.
"Employees still see the 401(k) plan as the central thing they think about when they think about benefits at work," McDonald said. "That certainly has not changed.
"The fact that employees have reduced their 401(k) contributions year over year is concerning because they'll miss out on taking full advantage of their work retirement plans and the compounding interest that can help them build wealth over time.
"Admittedly, putting money aside for long-term goals can be tough as costs like rents and school tuitions rise. Start by maxing out the most that you can do—not the most that's allowed, but the most you can do—in your 401(k) plan."
The amount you will need to save for retirement depends on your current financial status, what you expect to live on once you stop working, and how early you plan to retire.
According to Fidelity, saving at least 15 percent of your pre-tax income each year should be enough to allow the average American to retire comfortably.
Remember, the earlier you start setting aside money for retirement, the lower your yearly savings rate can be, and the more you are likely to have accrued come retirement age.
If you haven't started saving for retirement yet, don't worry. Fidelity suggests that if you start saving at 30, you should aim to save around 18 percent annually. If you start saving at 35, you should save 23 percent a year to retire with enough in the bank to keep you going.