Are you struggling with your finances or concerned that you haven’t started saving for retirement yet? You’re not alone. A 2019 report from the U.S. Federal Reserve found that 13% of people over age 60 don’t have any retirement savings, while 17% of people ages 45 to 59 lack any retirement savings apart from Social Security benefits. It’s even worse for younger people. Forty-two percent of those aged 18 to 29 have no retirement savings, and 26% of millennials aged 30 to 44 lack retirement savings.
By Dawn Allcot
Financially Savvy Female: 7 Things Every Woman Should Know About Social SecurityExplore: Here’s How Much Retirees Actually Have in Savings (Hint: It’s Not Enough)
Here are two potential reasons you may want to consider holding off on retirement savings:
1. You Lack Emergency Savings
If you don’t have an emergency fund, you should put your focus there first. An emergency fund should cover three to six months of living expenses, including your housing, car payments, gas, food and utilities, Motley Fool recommended. Whether you include discretionary expenses, such as streaming services or dining out, into your emergency savings fund is up to you.
If an emergency such as illness or job loss occurs, it could mean tightening your belt if you have to live on savings for a while. But that beats the alternative of incurring high-interest debt to make ends meet (more on that soon).
See: With A Recession Looming, Take These 3 Retirement Moves To Stay On Track
Motley Fool advised keeping your emergency nest egg in a high-yield savings account or somewhere else where it’s easily accessible. Some online savings accounts offer excellent interest rates. But make sure you can access that money immediately through a debit card or other means. Some online bank accounts require four to five business days to transfer funds to a brick-and-mortar checking account, but you can usually access the money immediately via debit card at an ATM.
2. Abundance of High Interest Debt
If you are looking at high-interest credit card debt, you’ll want to pause your retirement investment efforts until that is paid off. If you’re investing in a retirement account with an average yield of 3% to 8% but paying the national average of 16.7% or even more on credit card debt, you’re losing money daily. With interest rates on the verge of an increase, it’s wise to pay off high interest debt as quickly as possible.
If your credit is good, consider transferring some of that debt to a credit card that provides a 0% introductory APR offer. Calculate how much you’ll need to pay toward the bill each month to pay off the card before the introductory period ends. But be smart about transferring balances; put your older, high-interest card on ice so you aren’t tempted to use it.
Teens & Taxes: Should Your Teen Deposit Their Tax Refund Into a Roth IRA?Find: Why Retirement Saving With Cryptocurrency Could Be a Good Idea
Once you’ve got at least three months of emergency savings socked away and have reduced your credit card debt to a manageable amount, it’s time to re-visit your retirement plans and make up for lost ground. A financial advisor can help you find the best places to put your money for the highest yields or most security depending on your age, how many years you have left until retirement, and how much money you have already put into retirement savings.
