Americans' retirement savings face a hidden drain

New tires are required for the vehicle. The electricity bill is more than anticipated. Additionally, the mortgage payment is due on Friday.

Investing an additional $100 in a 401(k) may seem like a luxury to someone who is already straining every paycheck.

There must be a source of funding. And Americans are increasingly choosing to forfeit their retirement to make that decision.

The Penny Hoarder found that 28% of Americans cut or paused retirement contributions last year to cover expenses.

Twenty-two percent had no retirement savings.

The findings, published Nov. 2, came from an Oct. 8 Pollfish survey of 1,000 Americans ages 30 to 60. The statistics reveal an unsettling paradox.

Americans are advised to increase their savings, make regular investments, and let compound growth take care of the rest.

However, debt repayment, housing, insurance, and food don’t wait until retirement.

Additionally, the financial choices made to help families survive today may lead to a much more serious issue later on.

Retirement savings are becoming a financial lifeline

The Penny Hoarder’s report found that the median retirement savings balance among respondents was just $36,708.

At $147,159, the average was much higher.

This discrepancy is significant because a minimal number of rich individuals may raise the average.

Additionally, 24% of respondents to the study said they were not saving any of their income for retirement.

Read more: Warren Buffett sees a retirement problem getting harder to ignore

Even more concerning, 36% of respondents who had retirement funds said they had taken out an early loan or withdrawal at some time. Among those ages 30 to 45, the figure climbed to 41%.

Imagine a 42-year-old employee whose vehicle breaks down.

The cost of the repair is $2,000. The next paycheck has already been spent, and the emergency fund is completely depleted. Suddenly, taking out a loan from a retirement account seems more appealing than using a high-interest credit card to pay for the repair.

Although it’s a fictitious scenario, it shows the financial strain that influences such choices.

The repercussions may go well beyond the present crisis.

According to the Internal Revenue Service, an unpaid 401(k) loan may become a taxable distribution. Depending on the circumstances, it could also trigger an additional 10% tax.

It’s not always the case that employees no longer care about retirement.

Some people now consider the financial exigency of today to be more pressing than the financial freedom of tomorrow.

According to a survey by The Penny Hoarder, 24% of respondents are not saving any money for retirement.

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The hidden cost of putting retirement savings on hold

Even temporarily reducing contributions can carry a long-term price.

Think of a person who typically puts $50 into a 401(k) each week. Stopping for a year means $2,600 never reaches the account.

Depending on the terms of the plan, the employee may possibly lose out on extra retirement funds if the company matches those payments.

Additionally, individuals who miss deposits lose the chance to earn investment returns over the next decades.

This is not to say that everyone should put retirement payments ahead of need. For example, there are urgent financial hazards for someone who is facing eviction or high credit card debt.

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However, it explains why recovering from disruptions may be challenging.

Fidelity Investments recommends saving approximately 15% of annual income for retirement, including employer contributions. According to The Penny Hoarder’s poll, participants were saving around 7% on average.

More background is provided by the Federal Reserve’s October household-finance report. It found that 8.6% of American families spent more than 40% of their income on debt payments in 2025, up from 6.5% in 2022.

That’s money that can’t be used for emergencies, food, or retirement contributions.

Additionally, when workers get closer to their 60s, the issue may become worse.

America’s retirement backup plan has a catch

Another startling discovery was made by the survey. More than half of respondents (52%) expected to continue working into retirement.

Part-time employment was seen by almost 40% as a backup plan in case their funds were inadequate.

However, these plans can face complications. A career might end before a person reaches their intended retirement date due to a layoff, health issue, or caring responsibilities.

Additionally, 34% of respondents to the study expressed absolutely no confidence in their ability to continue living at their current level after retirement. Only 11% felt extremely confident.

Finding a sustainable balance between emergency savings, costly debt, and retirement payments may be the top concern for someone who is slipping behind.

This might include making enough contributions to be eligible for an employer match when funds permit, or developing a financial buffer before increasing 401(k) deposits.

For every home, there isn’t a single answer.

The survey’s results should be seen as a snapshot of financial strain rather than a projection of everyone’s retirement since it only includes 1,000 respondents, not the total U.S. population.

Its main point is still hard to overlook.

In decades to come, a retirement account is meant to provide financial stability.

Some Americans have already been requested to contribute to the cost of this month’s expenses.

And of all the trade-offs, it could be the most costly.

Related: Suze Orman has a serious retirement warning for 2027

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