5 Things the Average Retiree Won’t Be Able to Afford in the Next 5 Years
Written by
Sean Fisher, AI Editor
Edited by
Sean Fisher
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The landscape of retirement is shifting, with new challenges emerging that could impact the affordability of certain luxuries and necessities for the average retiree in the next five years. Here are five things that may become increasingly difficult for retirees to afford:
Healthcare Costs
The cost of healthcare is expected to continue rising, outpacing inflation. By 2027, U.S. healthcare expenditures are expected to rise to over 6 trillion due to increased inflation of healthcare and increased demand of healthcare. For retirees, this means higher premiums, deductibles, and out-of-pocket expenses for medical care and prescription drugs.
Without adequate savings or supplemental insurance, these costs could become a significant financial burden. According to a 2023 Health Plan Association report, “The average rates for individual plans have gone up a total of 31.4% from 2019 to 2023, with an average yearly increase of about 6%”. Meaning premiums/plans should expect to have a similar 5 year price increase.
Long-Term Care
As life expectancy increases, so does the likelihood of needing long-term care. The cost of assisted living facilities and in-home care services is already high and is expected to rise further. With the average cost of a private room in a nursing home exceeding $100,000 per year, many average retirees may find it challenging to afford long-term care without substantial savings or long-term care insurance.
Travel and Leisure Activities
Many retirees dream of traveling and enjoying leisure activities in their golden years. However, with the cost of travel expected to rise due to inflation and increased demand at popular locations, retirees on a fixed income may find it difficult to afford vacations, hobbies, and entertainment that were once within their budget. According to a study from USA Today, “Flight costs at major U.S. airports have increased an average of 29% since 2021”. In 5 years we can see a similar uptick of price in flights, followed by higher inflation to the location you’re traveling, to create a terribly expensive travel-combo that would make the average retiree want to just stay at home.
Housing Costs
The housing market has seen significant price increases in recent years, and rental prices are also on the rise. Retirees who rent or plan to downsize may face higher housing costs than anticipated. Property taxes and homeowners’ insurance rates are also increasing in many areas, adding to the financial strain for retirees who own their homes.
Looking at a study done by House Numbers, predicting housing trends in the 5 years, they write, “Based on historical averages of 3.5% of home value growth per year, property prices will rise a total of about 18 to 20% in 5 years.” Therefore, if you plan on selling a home for retirement, its best to hold and sell within the next 5 years to possibly get a better price. If you’re looking to buy or rent, better sooner than later with a more likelihood of increased cost. But timing also depends on location and financial situation. It’s best to do your research or hire an expert before making such a serious decision.
Food and Everyday Living Expenses
We all know this, prices of everyday items surprising and hurting us in the wallet. Inflation affects the cost of everyday living expenses, including groceries, utilities, and transportation. As prices continue to rise, retirees may find that their fixed incomes do not stretch as far as they used to, making it challenging to afford the basics. Look for locations with projected lower cost of living and have a budget planned for your expenses.
The Brightside
Despite the challenges, there are several bright sides for retirees in the coming years:
- Advancements in Healthcare: Medical technology and telemedicine are improving, offering retirees better and more convenient healthcare options.
- Increased Financial Awareness: With more resources and tools available, retirees are becoming better educated about financial planning, leading to more informed decisions.
- Social Security Adjustments: Cost-of-Living Adjustments (COLAs) in Social Security benefits can help offset inflation and rising living costs.
- Community Support: There is a growing emphasis on community support and resources for seniors, providing social engagement and assistance.
- Flexibility in Retirement: More retirees are embracing part-time work, freelancing, or volunteering, which not only provides additional income but also keeps them active and fulfilled.
To prepare for these challenges, retirees and those nearing retirement should focus on building a robust financial plan that accounts for rising costs. This may include saving more, investing wisely, exploring supplemental insurance options, and considering part-time work or other income sources in retirement. By planning ahead and staying informed about economic trends, retirees can better navigate the changing landscape and ensure a comfortable and secure retirement.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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