Is Retirement Saving Really Crowded Out by Other Priorities?

LIMRA Secure Retirement Institute found consumers who save for retirement are more likely to save for other goals.

Institute research looked at workers between the ages of 20 and 59 with household incomes of at least $50,000 and found that more than 70% are saving for retirement at work, outside of work, or both.  For retirement savers it is not a “zero-sum game” where saving for one purpose means the exclusion of others. The most popular reasons for saving other than retirement include emergency funds, vacations, taxes, and education.

One in five workers say they don’t contribute to their employer’s defined contribution plan because they have other savings priorities. Yet, the research indicates that those who are not saving for retirement tend not to save for other reasons, challenging the idea that retirement saving is “crowded out” by other financial goals, LIMRA contends. 

The research found 39% of those saving for retirement also save into an emergency fund, versus 20% of those not saving for retirement. More than one-quarter of retirement savers are also saving for vacation/travel, compared to 15% of those not saving for retirement. Retirement savers also save more for taxes (23% vs. 14%) and education (22% vs. 13%).

There is no conclusion from LIMRA whether these findings are due to income differences between retirement savers and those who do not save for retirement or due to planning and habits of retirement savers.