4 Common Financial Weaknesses Can Undermine Retirement Readiness

Retirement outcomes are shaped by more than access to an employer-sponsored retirement plan or an individual retirement account, according to a report from the Center for Retirement Initiatives at the Georgetown University McCourt School of Public Policy.

The report cautioned that retirement savers face heightened financial vulnerability if they lacked: stable and positive cash flow; basic financial literacy; sufficient emergency savings; and manageable debt. Between 2021 and 2024, three of those factors deteriorated among retirement savers, according to data from the FINRA Investor Education Foundation’s National Financial Capability Study, with a lack of emergency savings the most pivotal.

Lack of Emergency Savings

Drawing on the FINRA study, CRI’s report found that the lack of emergency savings was the most common vulnerability, faced by 36% of retirement savers. While the share of respondents reporting a lack of emergency savings had declined from 2012 through 2021—from 43% to 27%—prevalence of the same factor increased by 9 percentage points from 2021 through 2024.

Meanwhile, a lack of emergency savings increased the likelihood a participant would take a hardship withdrawal or loan from their retirement savings, the report stated. According to a June 2025 research note from Vanguard, participants with at least $2,000 in emergency savings were 19% less likely to take a 401(k) loan and were 17% less likely to take a hardship withdrawal than those without.

In 2024, 12% of working respondents with at least one financial vulnerability reported having taken a hardship withdrawal, compared with 2% of respondents who did not have a vulnerability, according to the CRI study.

High or Burdensome Debt

In addition, those with high and burdensome debt were less likely to make retirement contributions, CRI’s report cautioned. The proportion of retirement savers reporting debt increased to 25% in 2024 from 20% in 2021.

During a March 25 webinar discussing the CRI’s research, Hector Ortiz, a nonresident scholar with CRI and the author of the financial vulnerabilities report, said, “Without , the ability to save is reduced or stopped altogether.”

Unstable or Negative Cash Flow

Whether participants’ spending exceeded their income also indicated a financial vulnerability, according to the report. While the share of respondents to the FINRA survey who said their spending exceeded their income hovered between 15% and 17% from 2012 to 2021, it increased to 23% by 2024.

“Spending exceeding income in 2024 shows a deterioration compared to all prior survey years, probably reflecting affordability pressures associated with increasing cost of living since late 2021,” the report stated.

According to a separate survey from the Allianz Center for the Future of Retirement, 71% of respondents reported being worried they might not be able to afford the lifetsyle they wanted in retirement due to the increased cost of living. Meanwhile, 36% of respondents to Payroll Integrations’ “2025 Employee Financial Wellness Report” said rising living costs were impacting their retirement confidence.

Poor Financial Literacy

The CRI report cautioned that low financial literacy, reported by 11% of retirement savers, raises the risk of investing in unsuitable products, missing opportunities for compound growth or being exposed to market, inflation or other risks. The 2024 level marked a drop from the 13% who in 2021 reported having limited financial literacy.

In 2024, 54% of retirement savers reported having at least one of four vulnerabilities, up from 47% who reported the same in 2021, according to CRI’s report. The proportion of those who said they had one financial vulnerability rose 1 percentage point, to 26% in 2024 from 25% in 2025. The share reporting two or more vulnerabilities rose to 28% from 22% over the same period.

Other Factors Associated With Financial Vulnerability

The CRI’s analysis found several key demographic, financial and behavioral factors associated with financial vulnerability. Vulnerability rates were found to decline with age and income. The oldest and wealthiest in the dataset—about one-third of adults age 55 or older with an annual income of at least $100,000—reported having at least one vulnerability.

Men were less likely (52%) than women (57%) to report having at least one vulnerability, and white, non-Hispanic savers were less likely (50%) than other races (63%) to report the same.

Savers who reported owning cryptocurrency, experiencing fraud or carrying medical debt were especially likely to have at least one vulnerability. According to the report, exposure to any of those three could add stress to already vulnerable savers:

Financial vulnerability varied somewhat by location. In 2024, the states with the highest shares of retirement savers reporting at least two vulnerabilities included Arkansas (60%), Kansas (61%), Mississippi (64%), West Virginia (61%) and Wyoming (60%). Hawaii (45%) and Michigan (48%) were among the states with the lowest shares reporting vulnerabilities.

The state differences likely reflected variations in access to employer-sponsored retirement plans, demographics, housing costs, income distributions and labor markets, according to the report. Although no state reported a consistent decline or increase in vulnerabilities between 2012 and 2024, the gap between the state with the highest share of savers with a vulnerability and the state with the lowest share gradually, but consistently, increased to 4 percentage points from 2012 to 2024.

“In order to help achieve financial well-being, we need to be able to balance both the competing needs of maintaining financial stability in the present and the ability to make progress toward … long-term goals,” Ortiz stated during the CRI webinar.

The CRI’s analysis included NFCS data from 2012 through 2024, which was based on responses from approximately 25,000 respondents with retirement accounts.