The 3 Biggest Barriers to Retirement Savings and How to Overcome Them

Many workers struggle to save enough for retirement, but having the right strategies can help.

We think about saving for retirement like it’s a long-distance race. But rather than a clear path, many of us find ourselves dodging hurdles along the way. Sometimes, we can navigate them with a few alterations to our monthly budget. Other times, those hurdles feel like 10-foot brick walls in front of us.

The challenges each person faces on the journey toward retirement are unique, but there are several common trends. Below, we’ll look at some of the biggest retirement savings barriers according to a recent Goldman Sachs survey, and how you may overcome them.

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1. Too many monthly financial expenses

The biggest issue survey participants raised was a lack of extra cash due to too many monthly expenses. Some people may be able to fix this by reviewing their budget, setting hard limits on spending in various categories, and cutting unnecessary purchases. But others have already taken these steps and are still struggling.

Another way to address this problem is to increase your income, allocating the extra money toward retirement savings. If you put this extra cash into a tax-deferred retirement account, like a 401(k) or traditional IRA, it won’t raise your tax liability this year. This strategy requires extra time and a willingness to take on more work, though, which may not be doable for everyone.

Those who aren’t able to save as much as they’d like right now shouldn’t get discouraged. Start with what you can do, even if that’s just $5 monthly. The longer your cash remains invested, the more it’ll probably be worth. Smaller amounts contributed today could be worth more than larger amounts contributed later.

Later on, if you get a raise, increase your retirement savings rate first. Or you could boost your contribution rate by 1% of your salary per year. That’s just $50 more per month for those earning $60,000 annually.

Finally, delaying retirement or opting for a phased retirement where you gradually reduce the number of hours you work are viable alternatives for those struggling to save as much as they’d like for their future.

2. Financial hardship

This sounds similar to the point above, but it’s not. Financial hardships are unexpected expenses that derail your existing budget. For example, an ER bill after you unexpectedly get injured, your living expenses following a job loss, or a home insurance deductible after a tree falls on your house.

We can’t predict when these emergencies will arise, so we ideally prepare for them by saving three to six months of living expenses in an emergency fund. We keep this cash in a savings account where we can easily access it. And when we tap into our emergency savings, we replenish it as soon as possible so we’re prepared for the next unexpected expense.

Without an emergency fund, we may have to halt our retirement savings or charge the bills to credit cards. The latter can lead to a dangerous debt spiral that can last years or even decades.

Those who don’t have an emergency fund should make building one their top priority, even above retirement savings. Once you have this in place, you can think about making regular retirement contributions.

3. Caring for and financially supporting family members

When most of us think of financially supporting family members, we think of working parents trying to raise children — and this certainly comes with plenty of expenses. Parents who hope to fund their children’s college education have an especially difficult task. But other family members can put a strain on retirement savings as well.

Many workers today find themselves having to care for aging parents, some of whom may have long ago run out of savings. This can create short-term financial pressures for the worker and make saving for their own retirement all but impossible.

It’s a tricky spot, because no one wants to turn away family, especially when they’re in need. But it’s important to put your retirement savings ahead of other goals like your children’s college education and to limit financial assistance to others if you can’t afford it. If you don’t do this, you may not be able to save enough for retirement and your children could wind up taking care of you financially later on.

You can still help family members in other ways. Perhaps you can help them apply for financial assistance programs or find part-time employment. Or you could call upon other family members to provide some support so you don’t have to do it all yourself.

Even following the above tips, these challenges aren’t always easy to overcome. But all we can do is our best. Take things one day at a time and look for new opportunities to grow your savings.

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