In 2023, preparation for retirement took a negative turn. According to recent research by Fidelity Investments, a majority of future U.S. retirees are expected not to be able to pay for necessities like food and housing.

In comparison, about one-third of Americans should be on track for retirement. Yet, this figure also reflects a decline from about 37% in 2020. Not being able to plan for retirement is a reflection of current expenses taking its toll.

While this picture looks challenging, there are ways to lower expenses and resources to help with planning for retirement.
 

Inflation and Expenses

Inflation is one of the biggest reasons for increased expenses and the changes in retirement outlook. The costs of everyday goods such as eggs, milk, and bread have all increased in 2023, with some items (eggs) rising by 250%.

Despite efforts by the Federal Reserve to slow inflation with nine consecutive interest rate hikes, prices continue to rise this year. As the Fed focuses on stabilizing prices, households are trying to keep pace with rising expenses.

A second reason for increased expenses and a decreased ability to save for retirement is that more households are using credit cards to pay for necessities and bills. Unexpected expenses like house or car repairs or medical costs also place an added burden on families who often turn to credit cards for help.

To help address this financial crunch, families should first find ways to lower expenses.
 

Lowering Expenses

One strategy to reduce expenses to more controllable levels is to evaluate overspending. That means reviewing smaller purchases and reducing or eliminating those that are unnecessary. This could add up to both short and long-term savings.

First, households can target recurring expenses that may be overlooked in a budget. For example, streaming services like HBO or Netflix represent a potential area to help save money. Eating out is also a recurring expense to review for monthly budgets.

A second step is monitoring household expenses like cable, phone bills, and gym memberships and identifying ways to reduce spending in these categories. Monitoring electricity and gas usage can also reduce everyday expenses.

A third way to lower expenses is to pay close attention to credit card interest rates. Target payments toward higher-interest rate cards to lower the balance, or take advantage of a balance-transfer offer to place that balance on a lower-interest rate card.

A fourth option to reduce overspending is to reassess housing situations. Although Americans still desire home ownership, renting can provide a more affordable arrangement that reduces expenses and could allow for some retirement savings.

The main idea is to track spending in common areas that may not be fully considered and make choices about how to reduce those expenses. Online and downloadable spending trackers can help with this task.

Taking these steps could help provide a pathway for current financial stability and future retirement.
 

Expenses and Resources

After budgeting and reviewing expenses, families may still need additional help. The federal government provides resources to help households with current expenses and to plan for retirement.

Through USAGov, the federal government offers emergency rental assistance programs, food stamps, and meal programs. The Low Income Home Energy Assistance Program (LIHEAP) provides help with heating and cooling costs along with energy efficiency improvements for homes.

To help plan for retirement, the federal government USA.gov website also provides savings worksheets and videos about determining a target savings rate. It also explains how social security works and eligibility.

United Way 211 is another resource that households can turn to for help with information and local services about meeting expenses. The 211 network helps over 20 million requests per year and identifies organizations that provide support for food and nutrition programs, housing options, and health care.

For those households who can save some money each month, Individual Retirement Accounts (IRAs) are a solid option. In 2023, up to $6,500 can be saved in an IRA on a tax-deferred basis. IRAs have been recognized by financial advisors as a great step to take toward creating retirement savings, especially for those without an employer-provided plan.