Some Halt 401K Contributions Under Inflationary Pressures
CHATTANOOGA (WDEF) — A report from Savings.com indicates that twenty five percent of Americans are reducing or pausing their 401K contributions.
The report suggests that inflation is to blame.
People are choosing not to save their money, as essentials such as groceries and housing grow ever more expensive.
“The numbers we got this morning for inflation show that energy prices were down but food prices were up. Housing, especially, was up. That was the biggest single contributor to this high inflation rate,” said Apogee Wealth Partners’ Principal Chris Hopkins.
But Hopkins says pausing 401K contributions is generally a bad idea.
According to Hopkins, the only reason to do so is to avoid debt.
“If you think you’re going to have to go into debt — or further into debt — in order to make ends meet, then it would be preferable to cease or halt
your contributions, rather than putting it on the credit card or racking up high-interest debt and going deeper into the hole,” said Hopkins.
To combat inflation, the Federal Reserve has been steadily increasing interest rates, which artificially reduces demand for big loans.
This strategy was implemented to fight inflation in the early 80’s, and Hopkins points to its success as an indicator of inflation eventually cooling
“This late summer early fall period will probably be the turning point for inflation. A year from now, we’re probably looking at maybe five percent
inflation, on its way back to two by the end of 2024,” said Hopkins.
The rate of inflation is currently 8.26%.