As the Covid-19 pandemic stretches on, with record unemployment and increasing economic uncertainty, more U.S. consumers are eager to save money to weather the storm.
A desire to save
In fact, when asked what they’d do with an unexpected windfall, nearly 40% of U.S. consumers said they’d save the money, compared to about 13% who said they’d spend it, according to new data from research company Yougov, which polled 27,681consumers in 26 countries in June, 2020. Part of the reason is reportedly mounting insecurity around employment, with nearly a quarter of U.S. consumers saying they feel less secure about their jobs than they did before the pandemic.
That desire to save is echoed in new data from Stash, which shows a surge in retirement account openings since March, 2020 when the economic crisis began. Stash saw a roughly 60% increase in new Roth and traditional IRA account creations between March and June 2020, compared to the preceding four months.1
Of these new accounts, the largest increase for the four month period was among retirement age people 65 and older, where account creation increased 76%, as well as those earning over $100,000, where account creation increased 211% over the same time period. (There was a 54% increase among those earning between $25,000 and $50,0000, and a 74% increase in account creation for those earning $50,000 to $100,000.)
The financial stress caused by the pandemic could keep pushing consumers to save their money instead of spending it. As of April, 2020, Americans were saving 33% of their disposable income, a record percentage, according to some sources.
Stash retirement accounts
If you’ve found yourself with extra savings as a result of the pandemic and you haven’t set up a retirement fund yet, consider setting up a Roth or Traditional IRA.2 With a Traditional IRA, you can make contributions on a pre-tax basis. With a Roth IRA, you can make contributions after taxes. You can set up either kind of account on Stash. If you already have an IRA or an employer-sponsored 401(k), consider increasing your contributions to those savings.
Keep in mind that there’s a limit to how much you can contribute to your retirement accounts per year. In 2020, you can contribute up to $19,500 to a 401(k) and $6,000 to an IRA. If you’re older than 50, you can make catch-up contributions, up to $7,000 into an IRA or $26,000 into a 401(k).