Americans Are Using Retirement Savings to Cover Emergencies

A lot has been written about how so few Americans are really prepared for retirement. We usually see this expressed as a lack of adequate savings, but there’s another side to the coin.

In fact, many Americans do save for retirement, then find themselves using these funds well short of retirement age, to cover emergency expenses.

In a recent report, Bankrate said that around 30 million Americans have tapped their retirement savings for an emergency in just the past year alone.

Younger adults (millennials) are the least likely to be offenders. In Bankrate survey, 40% of millennials say they are better off than they were a year ago. It is therefore not too surprising that only 8% of them had dipped into retirement savings over the past 12 months.

Things get far worse when we move into the 50-64 year-old age category. Bankrate found that 17% had dipped into retirement savings over the past year, and 26% said their financial situation has deteriorated over that time.

Given that 21 million Americans say they aren’t saving for retirement at all, it’s particularly distressing to see so many who are saving feeling compelled to tap those savings.

It all adds up to future trouble, since most Americans either aren’t saving anything for retirement, are saving too little or are dipping into what savings they have accumulated.