Since the pandemic, inflation and higher costs of living have pushed many Americans' wallets to the brink. They've been forced to cut back in several areas, including saving for the future.
A 2025 Morgan Stanley at Work study found about 39% of employees surveyed said they reduced their 401(k) contributions as a result of current economic conditions, and 67% say they're reducing contributions across all savings accounts. That's a 4% increase from 2024.
Some were forced to draw from those retirement savings. A 2025 report from Vanguard found a record 4.8% of 401(k) account holders took a hardship withdrawal in 2024, more than double the 2.3% recorded in 2019.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.
While tough economic conditions have forced many Americans to conserve and stretch their dollars — are you putting your future at risk if you reduce or pause your retirement contributions?
Don't forget the benefits of contributing
One of the biggest benefits of contributing to an employer-sponsored retirement plan is taking advantage of the employer's match.
If someone reduces their contributions enough to no longer qualify for their employer's full match or pauses those contributions entirely, they're essentially walking away from free money. They're also preventing that money from compounding over time.
Depending on how long you reduce or pause contributions, you could be missing out on thousands of dollars.
For example, in 2025, the maximum employee contribution to a 401(k) is $23,500, with an additional $7,500 available for catch-up contributions for those age 50 and older.
Depending on their plans, workers ages 60 to 63 might qualify for a special super catch-up contribution of $11,250, for a total of $34,750.
You lose out on compounding growth, too
Aside from losing the match, pausing contributions entirely forces you to lose the benefits of compounding growth. Every dollar you contribute early in your career has decades to grow.
To give you a better perspective, let's say an employee has an annual salary of $50,000 per year and their employer offers a 100% match on contributions up to 5%.
If the employee reduces their contribution so the employer only matches 3%, that's a 2% loss each year. In dollars, that's a $1,000 loss each year.
If that money is growing at 7%, that 2% reduction, or $1,000 loss per year, will add up to $41,000 less in a retirement account after 20 years.
At the surface level, missing out on $1,000 a year might seem minimal, but over decades, it can cost you tens of thousands of dollars at retirement.
The tax implications
Pausing or reducing contributions can also have tax implications. If you have a traditional 401(k), contributing to that account reduces your taxable income in the year the contribution was made.
Pulling back on those contributions increases taxable income, which could potentially push you into a higher tax bracket if you're currently teetering on the edge.
If you have a Roth 401(k), cutting back on contributions forces you to miss out on growing tax-free assets for retirement.
Retirement plans are made with the assumption that you'll be making consistent contributions to your accounts.
Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.
Reducing or pausing those contributions can create a financial gap that could mean working longer than you intended, saving much more aggressively in the future to catch up (which could lead to other sacrifices), or living on less once retirement comes.
What you could do instead
While it might feel like a quick fix, you should seriously consider the long-term tradeoffs. A couple of hundred dollars saved now could mean tens of thousands lost in the future.
If you find yourself struggling with expenses, consider making other adjustments before turning to your retirement account. Look into picking up extra hours at work or search for ways to earn additional income.
We're living in a gig economy, and the opportunities are endless. If you have a budget, revisit it and look for areas in which you can cut back. This could be subscription services, eating out or simply cutting frivolous spending.
If you don't have a budget, make one to ensure you're living within your means. If you feel your only option is to reduce or pause your contributions, meet with a financial adviser to see how that would impact your current retirement plan.
Chris Cohan is a registered representative of and conducts securities transactions through CoreCap Investments, LLC. Chris Cohan is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. NJP Estate Planning is a separate entity and not affiliated with CoreCap Investments or CoreCap Advisors.
Related Content
- New 401(k) Withdrawal Rules to Know in 2025
- The 401(k) Mistake That Could Cost You Millions in Retirement Savings
- When the Market Seesaws, Should You Touch Your 401(k)?
- 401(k) Super Catch-Ups: Are They Right for You?
- Five Ways to Catch Up on Retirement Savings
-
S&P 500 Hits New Highs as Rally Resumes: Stock Market TodayTech stocks were the biggest gainers on Wall Street today, with Nvidia and Dell making notable moves.
-
The Shutdown Standoff Is Heading for Its Next Big TestA key mid-October deadline could intensify the shutdown fight in Washington, and the fallout could soon hit workers and your wallet.
-
S&P 500 Hits New Highs as Rally Resumes: Stock Market Today
Tech stocks were the biggest gainers on Wall Street today, with Nvidia and Dell making notable moves.
-
Should You Buy Gold as It Tops $4,000? Here's What the Experts SayRate cuts, a weak dollar and macro uncertainty have helped create a "perfect storm" for gold this year. Should investors add exposure or is it too late to buy?
-
The 'Permission to Spend' Rules of Retirement SpendingHere’s how to spend guilt-free when you are in retirement.
-
Major Insurers Scale Back Medicare Advantage and Part D Plans for 2026Beneficiaries enrolled in Medicare Advantage and Part D prescription drug plans might be losing their plan as UnitedHealthcare, Humana, and Aetna (CVS Health) scale back offerings for 2026.
-
I Want to Retire, but I Have to Keep Working so My Adult Kids Have InsuranceIt's a tricky period when your adult child is under 26 but needs health insurance. We ask financial experts for advice.
-
Preferred Bank Stocks: The Investment Retirees (and Others) May Be Missing Out OnMost large banks issue preferred stocks that pay out fixed dividends, often with higher yields than bonds. Should you make room for them in your portfolio?
-
Don't Let Your Equity Compensation Trip You Up: A Financial Expert's GuideStock options, RSUs and other executive perks can come with some serious strings attached. To avoid a nasty tax surprise, you need a plan.
-
Rally Fades on Mixed AI Revolution News: Stock Market TodayAll three main U.S. equity indexes opened higher but closed lower as a seven-session winning streak for the S&P 500 came to an end.
