A recent survey conducted by Charles Schwab found 49 percent of Americans are changing the way they approach contributing to their individual retirement accounts due to the current economic climate. The data showed 18 percent of Americans with an IRA are contributing less so they can afford daily living expenses, 6 percent cannot afford to contribute to their 401(k) and their IRA while 10 percent have withdrawn money from their IRA.
The down economy has hurt many consumers' savings efforts, but also encouraged Americans to take extra steps to prepare for their financial future through investments in life insurance, annuities and other products. The study found 15 percent of Americans with an IRA are now contributing as much as possible for retirement to help safeguard against financial hardship in the future.
Carrie Schwab-Pomerantz, senior vice president of Charles Schwab & Co., said economic uncertainty and a volatile stock market is greatly affecting consumer behavior and financial decision-making.
"While we understand the temptation - and sometimes the necessity - to sacrifice retirement funds to cover shorter-term expenses, we continue to encourage people to maintain a long-term outlook and reinforce the importance of early and consistent retirement saving and planning," Schwab-Pomerantz said.
The uncertainty of consumers with regard to financial planning is underscored by a lack of understanding on how IRAs work. The study showed 53 percent of Americans are confused about at least some aspect of IRAs, and 35 percent of consumers between 18 and 34 do not know what an IRA is. For 28 percent of consumers, the most confusing aspect of an IRA is the advantage of having both a 401(k) and IRA, while 27 percent did not understand IRA tax rules and implications, 25 percent were confused by the different types of IRAs and 23 percent did not know how to open or choose investments in an IRA.
To help Americans, particularly seniors, plan for their futures, celebrity Betty White recently launched an education video on YouTube to discuss the importance of retirement planning. In the video titled "I'm Still Hot," White sings about The Lifeline Program which protects the interests of senior citizens and their life insurance products, News USA reported.
So far, White's video has received 1 million hits, helping create awareness of the importance of life insurance and planning for the future. White's video is targeting not only senior citizens but baby boomers as well, who still have ample time to set up retirement accounts, NewsUSA reported.