According to Charles Schwab’s latest quarterly retirement pulse survey, 18% of Americans with an IRA are contributing less in order to cover everyday expenses. Six percent say they cannot afford to contribute to both their 401(k) and their IRA, and 10% have withdrawn money from their IRA.
Not all of the economy’s effects have been negative, however. Continued economic uncertainty has also motivated some Americans to take extra steps to better prepare for their future. Fifteen percent of people with an IRA say they are now contributing as much as possible for retirement.
“It’s not surprising that people’s continued skepticism about the economy is impacting retirement savings habits,” said Carrie Schwab-Pomerantz, senior vice president, Charles Schwab & Co., Inc. “While we understand the temptation—and sometimes necessity—to sacrifice retirement funds to cover shorter-term expenses, we continue to encourage people to maintain a long-term outlook and reinforce the importance of early and consistent retirement saving and planning.”
Schwab’s survey also highlights that a majority of Americans are confused about what IRAs are or how they work. Fifty-three percent of Americans surveyed are confused about at least some aspect of IRAs, and 35% ages 18 to 34 don’t even know what an IRA is. Among all respondents, the most confusing aspects of IRAs are the advantages of having both a 401(k) and an IRA (28%), IRA tax rules and implications (27%), the differences between different IRA types (25%) and how to open or choose investments in an IRA (23%).