Until a few months ago, Kloe Lloyd, who works as a policy and advocacy associate for a research firm in Washington, D.C., did not have saving for retirement on her to-do list.

"It’s been a struggle," the 25-year-old told Yahoo Finance. "A lot of Gen Zers like me got a late start with our career because of the pandemic, and inflation has absolutely hit my ability to save for retirement. With these high prices, how could I even think about saving for the future when I don't know what tomorrow looks like?"

But she did. Starting in November, Lloyd began saving in a Roth IRA with contributions of $25 automatically taken from her checking account every Monday. "It makes me feel good," she said. "I'd love to put more in it, but I can't afford to do that. I’m just trying to cover the necessities."

For many Americans like Lloyd, rising costs have made saving for retirement difficult. They’ve paused contributions to retirement accounts or pared them back. Others have dipped into these accounts through loans or straight-out withdrawals.

The other side of the savings mirror

Thanks in large measure to auto-enrollment and auto-escalation provisions in employer-provided 401(k), last quarter, the total 401(k) savings rates at Fidelity reached a record high of 14.2%, driven by employee and employer contributions that matched previous record levels (9.4% and 4.8%,respectively.)

While that's great news, it obscures the underlying stress that workers who don't have access to these kinds of employer-provided retirement plans, like Lloyd, are facing when it comes to saving for retirement while inflation relentlessly hits day-to-day living expenses.

Even though, US inflation cooled slightly in May, according to the latest data from the Bureau of Labor Statistics, the the cost of food and medical bills continued to rise. On top of mortgage payments, since 2020, homeowners have seen a surge of 26% in basic costs such as home insurance, property taxes, and maintenance, according to a recent Bankrate survey. Rent, too, has jumped.

Put simply, folks are more concerned about paying bills than saving for retirement.

The share of Vanguard 401(k) holders, for instance, who raided their accounts for financial emergencies in 2023 was the largest ever. At Fidelity, in the first quarter of this year, the percentage of workers with a loan outstanding was 17.8%, up from 16.7% a year ago.

It’s the flipside to the heartening news that the robust stock market has juiced retirement account balances for droves of Americans in recent months.

"It’s kind of the wild, wild west of retirement savings right now," Josh Hodges, the chief customer officer at the National Council on Aging, told Yahoo Finance. "There are so many people who are able to put away significant amounts of money for retirement, and that's great, but there's the vast majority of Americans who are probably undersaving for retirement because of inflation."

Chances are, many of those include the estimated 56 million private sector workers who don't have an employer-provided retirement plan at work — one that automatically enrolls them in savings plans and whisks aside a portion of earnings pre-tax into tax-deferred accounts.

Employees who work for a company that offers automatic enrollment save nearly 50% more than employees who save voluntarily, according to Vanguard data.

The toll of inflation

From gasoline and groceries to home repairs and rent, higher costs have been unrelenting for nearly two years. The most recent report from the Labor Department revealed that consumer prices were 3.3% higher than a year earlier. That's a stunning improvement from the 9% peak in June 2022, but the cumulative growth has made the very idea of saving for retirement stretch at best.

The result: A stunning 7 in 10 Americans have cut their contributions to their retirement savings accounts due to the rising cost of living, according to the 2024 first quarter study from Allianz Life Insurance Company. About 2 in 3 are more worried about paying bills than about saving for retirement.

Another troubling finding: More than 2 in 5 Americans say they have dipped into their retirement savings because of rising inflation.

"What we’re seeing is that many Americans have used stop-gap measures to make ends meet recently," Kelly LaVigne, vice president of Consumer Insights at Allianz Life, told Yahoo Finance. "While some may have been able to withstand inflation at the beginning, the prolonged increase in prices — especially on essentials like for food and energy — without an equal increase in wages has hit many people’s breaking point."

Read more: Retirement planning: A step-by-step guide

Needs of now vs. later

It's not that people are doing anything wrong.

"People are really being forced to choose between the needs of now versus their retirement planning — which could easily be 30 or 40 years of their life relying on the income that they are saving now," Hodges said.

With the population of Americans 100 or older projected by the Census Bureau to quadruple in the next 30 years, the future challenges are not to be taken lightly. Compared to their parents’ retirement, over half of Gen Z and millennials believe they’ll have a harder time saving for retirement due to the higher cost of living, according to a recent Fidelity report.

Even temporarily halting regular contributions to retirement savings accounts can have lasting repercussions when you calculate the lost growth that comes over time with compounding.

"In spite of a broad stock market rebound, we found that employee financial wellness continued to trend downward in 2023, following a year marked by inflation and increased costs of living," Mindy Yu, Betterment at Work's director of investing, told Yahoo Finance. "Emergency funds have been significantly depleted, leaving individuals increasingly prone to tap into their retirement savings."

A third of workers tapped into their retirement savings to pay for necessities like rent, car repair, and medical expenses, and 42% said they couldn’t afford to divert any more of their paycheck to savings, according to a recent Betterment at Work survey.

Retirement planning moves

The economic reality is forcing difficult choices.

"While my clients haven’t tapped into their retirement accounts early, several are delaying retirement, or have reduced work hours, instead of a hard stop for work because of concerns over rising costs," Tricia Rosen, a financial planner and founder of Access Financial Planning, told Yahoo Finance.

While there’s no sidestepping the stark cash-flow dilemma many workers face at the moment, there are some things you can do to try to reset your mindset about retirement savings.

Step one is to run one of the free online calculators provided by AARP, Bogleheads, Fidelity, Schwab, or Vanguard that can begin to give you an idea of how much you need to save for a comfortable retirement.

Another step is to shoot for saving 15% of income per year (including employer contributions). Generally speaking, that’s a savings level that works for most people when inflation is not on a tear. That doesn’t mean at 25, you can carve out that much, but start at, say, 6%, and slowly inch up to reach that target.

Your goal should be to have around 10 times your pre-retirement income saved by the time you reach age 67, according to Fidelity. To break that down, by age 30, you should have the equivalent of one year’s salary saved. By age 40, 3x your income. By age 50, 6x your income, and by age 60, 8x your income.

Some good news is that saving for retirement has gotten a little easier thanks to the phase-in of a handful of provisions in the Secure 2.0 Act. Under the law, employers can now consider student loan payments as qualifying contributions toward retirement-matching programs. They also have the go-ahead to offer their employees the option of putting money into an emergency fund that is paired with their retirement plan.

Financial literacy matters

Lastly, early financial education is a keystone to bolstering retirement savings through all types of economic cycles. It’s important to have a basic understanding of concepts such as investing, taxes, insurance, and even budgeting.

Although only a little of a quarter of employers offer financial wellness programs, that number is growing, according to a 2023 Transamerica Institute report. Check with your human resources department to see what might be available to you.

If you’re serious about getting up to speed, consider signing up for a free online course such as The Finance for Everyone course, developed by the University of Michigan that covers finance fundamentals. Or pick up a personal finance book. Two I recommend are "Get a Financial Life: Personal Finance in Your Twenties and Thirties" by Beth Kobliner, and Mark Miller’s "Retirement Reboot: Commonsense Financial Strategies for Getting Back on Track."

"I had never even heard of a Roth IRA until a few months ago," Lloyd said. "There are just gaps in financial literacy, especially for someone who came from a rural area in Mississippi. No one was telling me about these things because all of them were probably in the same boat. They can't save because they have to use what they have to survive."

It’s also frustrating to hear about people whose retirement accounts have boomed thanks to the stock market gains.

"Those gains don’t measure what people are actually dealing with," Lloyd said. "If General Motors’ stock is having a good day, that doesn’t mean I'm going to be able to pay $4 for bell peppers."

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including "In Control at 50+: How to Succeed in The New World of Work" and "Never Too Old To Get Rich." Follow her on X @kerryhannon.

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