People hamstrung by a lack of savings are delaying a wide number of major life events, such as retiring, buying a home, going to graduate school, getting married or even starting a family. This is the finding of a survey by the American Institute of Certified Public Accountants (AICPA).
Eighteen percent are delaying retirement, up from 9% in 2007; 24% are putting off higher education, up from 11%; 22% are postponing buying a home, up from 14%; 19% are delaying a medical procedure, up from 9%; 12% are putting getting married on hold, up from 6%; and 13% are delaying having children, up from 5%. Overall, 51% of Americans have postponed at least one important life decision in the past year due to financial concerns, up considerably from 31% in 2007.
Asked specifically what kinds of financial setbacks they are facing, 60% said a lack of savings, 50% reported concerns about the U.S. economy, 39% claimed difficulty paying non-mortgage bills, and 29% cited medical bills. Other drawbacks: taking care of elderly parents (29%), paying down credit card debt (28%), the fear of losing their job (27%) and difficultly making mortgage payments (25%).
These concerns are somewhat surprising, given that many Americans say they have recently taken positive financial steps, such as improving their financial behavior since the recession (85%), following a monthly budget (58%), increasing their savings rate (44%) and contributing to an emergency fund (35%).
The findings suggest that retirement plan advisers and sponsors need to do a more rigorous job of helping people with their overall financial wellness.
If people do not have adequate savings, then their decision to delay major life events makes sense, says Ernie Almonte, chairman of AICPA’s National CPA Financial Literacy Commission. “When making major life decisions like buying a home or getting married, it’s crucial that you consider both the short- and long-term financial implications,” he says. “If you don’t have adequate savings in place or you’re having trouble paying your bills, it may make sense to hold off on major life decisions until you’re on more solid financial footing. The most reliable way to afford the costs of major life decisions is to start saving at a young age and increase your savings rate whenever possible.”
AICPA’s National CPA Financial Literacy Commission recommends that people take the following four steps to improve their financial outlook:
- Start or increase their savings rate;
- Start or continue to follow a monthly budget;
- Use their credit cards less frequently; and
- Start or add to an emergency fund.
Harris Poll conducted the survey for AICPA in March, interviewing 1,010 adults by telephone.