Inflation impacts retirement plans, study shows

by / ⠀News / May 22, 2024
Retirement Plans Inflation

High inflation is affecting the retirement plans of many individuals, with most considering delaying their retirement due to inflation. A recent study has revealed that in the past five years, 60% of investors have changed their retirement strategies, with half acknowledging that economic conditions have influenced these alterations.

The climbing prices for essential goods including housing, fuel, and groceries are causing significant financial strain for consumers. Even though inflation has dropped from its 9.1% peak in June 2022, it still remains a concern as prices have elevated by 20% since January 2021, leading to higher levels of debt among households.

The statistic shockingly only revealed that 38% of investors felt certain about the retirement savings target amidst the prevailing economic inconsistencies. The assumption by many is that a retirement income between $1 million to $2 million would suffice, with 19% of investors having a planned strategy to reach their retirement saving targets.

Inflation’s influence on retirement strategies

However, a majority are heavily relying on generic advice as opposed to personalized planning.

Rona Guymon, Senior Vice President of Annuity Distribution at Nationwide, commented on the current economic condition stating, “Americans think they need over $1 million to retire comfortably— a number that can be intimidating even for earnest retirement savers.” She emphasized the importance of diversified saving strategies to meet the suggested retirement savings in the ever-volatile economic climate.

Inflation is also causing significant financial stress on most U.S households due to the elevation in prices for basic necessities such as food and housing. Cost for food has raised by 21%, housing by 18.37%, and energy by 38.4% since 2021. The increase in essential costs has limited the amount individuals can save every month, thereby impacting their long-term saving goals and retirement security.

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Lower-income households are the most affected, with most of their income being used on necessities, thereby minimizing their financial flexibility. As of March, U.S households are needing an additional $227 per month to afford the same goods and services compared to a year ago. Additionally, Americans are currently spending an average of $784 more per month compared to two years ago and a staggering $1,069 more compared to three years ago, a reality that signifies severe economic difficulties and the continuously broadening wealth gap in society.

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