Older Americans Fear Inflation Will Drain Their Retirement Income

July 17, 2024

For a variety of reasons, not least among them labor shortages, global political events, and the continuing specter of the COVID-19 pandemic, the U.S. is facing once-in-a-generation inflation rates. According to Statista Research, the annual inflation rate in the United States increased from 3.2 percent in 2011 to 4.7 percent in 2021.

Inflation, the idea that spiraling costs have weakened Americans’ purchasing power, is currently taking a large bite out of American incomes to pay for necessities such as food, rent, healthcare, gasoline, and utilities, as well as clothing and household goods. Working Americans might hope for cost-of-living raises that help them keep up with inflation, but what about older Americans living on a fixed income?

recent survey conducted by the American Advisors Group found that inflation is very much on older Americans’ minds. The survey, which was conducted in December 2021, included 1,580 participants.

The study found that more than one-third (36 percent) of people between the ages of 60 and 75 reported that they have less money than they thought they would at this point in their lives, and 29 percent believe they will outlive their retirement funds. In addition, two-thirds (66 percent) of respondents said they are worried that economic inflation will have a negative impact on their retirement, and more than half (53 percent) said the cost of living was higher than they anticipated when they did their retirement planning.

Overall, inflation is at a 40-year high, with consumer prices surging 7.5 percent in January compared to a year earlier. Americans age 65 and older spend an average of $48,106 per year — including $6,719 on healthcare — according to recent data from the Bureau of Labor Statistics.

“Many seniors in this country are discovering that their retirement plans aren’t working out as they had hoped, and inflation is only making that reality worse,” said Martin Lenoir, AAG’s chief marketing officer, in a press release.

Bad performance years can have devastating consequences for people who are in the process of retiring or are currently retired. Dire consequences include deferring retirement dates, taking part-time jobs, and reducing standards of living. And the more retirees and those near retirement age depend on the assets for retirement income, the more devastating the potential consequences.

Good retirement planning should focus on longevity (since we are living longer). Because retirement planning is a process that is impacted by change, including inflation. It is so important to look for a financial services firm that will stress-test your plan to make sure you’re addressing the “what ifs” that life can throw your way. You should have an evolving plan that helps you feel confident about your future.

At Prime Wealth Advisors, we are a full-service retirement planningtax, estate, and wealth management company that can help you ensure your retirement funds last in the way you had hoped they would.

Call 623.77.PRIME for more information.

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