Background: This week, we are taking a closer look at one of the November RRC Summit sessions, “Spending spikes can put retirement readiness at risk – but plan sponsors can help,” which was presented by Sharon Carson, J.P. Morgan Asset Management. This Research Minute will expand on both the nuanced definition and the financial impact of these spikes.

The RRC Summit, held in late November at BNY Mellon in New York City, brought together a wide variety of speakers, from panels that framed plan sponsor and industry discussions to quick sessions led by academics and researchers. The next Summit will take place on February 29th at Pacific Life in Newport Beach, CA.

Findings: This study quantified a spending spike as spending over a rolling 12-month average that is greater than income by $2,500. Most participants (three in four people) who make less than $150,000 experience these spikes, and, even more concerning, half experience spikes greater than their income and savings combined.

Spending spikes may result in greater credit card debt, more 401(k) loans, and/or a lower retirement plan contribution rate, potentially negatively impacting retirement readiness. This impact is compounded for those without access to emergency savings.

Bottom line: Although spending spikes may seem daunting to participants and plan sponsors alike, there are steps that plan sponsors can take to help participants stay on track for retirement. Emergency savings programs coupled with targeted financial wellness education may be effective in meeting some of these challenges.

Check out more materials from the Summit, a full agenda and list of speakers for the above sessions, and recordings from the event on our RRC member site. You can also join the conversation about insights from the Summit on LinkedIn.