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Oct. 5, 2022, 10:17 a.m. EDT

Another casualty of inflation: People are saving less for retirement

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By Jessica Hall

Inflation is eating into retirement savings

Inflation has hit everything from the price of groceries to car repairs to energy bills, and now it’s eating into retirement-savings rates.

According to a Morgan Stanley study released Wednesday, the economic impact of inflation has forced 62% of employees surveyed to reduce contributions to their savings, with nearly a third (31%) reducing contributions to their 401(k) plans and more than a quarter (26%) scaling back on paying down debts.

“The data makes it clear that employees are struggling to find a balance between long-term savings and immediate needs,” said Anthony Bunnell, head of retirement at Morgan Stanley at Work.

U.S. inflation hovered at 8.3% in August, down slightly from 8.5% in July and a 41-year high of 9.1% in June.

Read: U.S. inflation roars back in August, CPI shows, despite falling gas

Gen Z (74%) and millennials (68%) were more likely to have made reductions to their savings and retirement than their baby boomer counterparts (37%), according to Morgan Stanley’s Second Annual State of the Workplace Financial Benefits Study. The data from the study came from a survey of 1,000 U.S. employed adults and 600 corporate human resources leaders.

The financial challenges employees experienced over the past year include difficulty paying off debt or loans (45%), financial crisis (44%) and drawing on emergency savings (38%), the survey found.

The economic stress is affecting people’s work and personal lives, the study found. Employees citing money-related stress as a inhibitor on their performance increased year over year. Nearly three in four employees (71%) reported that money-related stress negatively affected their work and personal lives, up 7% (from 64%) in 2021.

Among age groups, millennials (77%) would be most likely to say financial stress is negatively impacting their work and personal lives, up from 69% the previous year.

At work, many employees struggled in silence, with nearly half (47%) of workers reporting that they have either never thought to reach out or are unsure if they are allowed to reach out to their employer for assistance with their personal finances.

When asked what type of retirement planning would be most beneficial to them, employees identified access to a financial adviser as their top choice at 52% of respondents.

All the human resources professionals surveyed said that retirement planning assistance from financial professionals is a priority in retaining employees, with 76% citing this support as a top or high priority. Among employees, 93% of workers viewed retirement planning assistance as a priority when choosing where to work.

“Employees are looking to their employers for the resources and support they need to navigate personal financial challenges — challenges that have a real impact on their professional and personal success, both day to day and long-term,” said Krystal Barker Buissereth, head of financial wellness at Morgan Stanley at Work.

“Especially in the face of today’s high inflation and market uncertainty, we are seeing that smart and accessible workplace benefits like financial wellness can be a lighthouse for employees to find helpful tools, financial education, and professional guidance,” she said.

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