Inflation Delayed Retirement For 25% of Americans
The four-decade high inflation is hitting Americans in every aspect of their life, from ballooning food and gas prices to an extremely pricey housing market. And now, a new report finds that because of inflation, 25% of Americans will need to delay their retirement.
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The BMO Real Financial Progress Index, released May 31, found that inflation and rising consumer costs are severely affecting Americans.
So much so that 60% of Americans said that inflation has adversely affected their personal finances, with one-in-four saying that they have felt a major impact.
In addition, as a result of inflation, 36% of Americans have reduced their savings and 21% have reduced their retirement savings, the survey notes.
Younger Americans are feeling the most impact, with 60% of those aged 18-34 saying they had to reduce contributions to their savings.
Chris Motola, financial analyst, MerchantMaverick.com, told GOBankingRates that “inflation tends to hit savers hard by directly reducing the value of their savings.”
“The phrase ‘saving for retirement’ says it all when it comes to this topic. You have a generation of people who built up savings expecting it to last X number of years after they retire,” Motola said. “High, unexpected inflation changes the math entirely. The money that was supposed to last you until the end of your life is looking like it will run out well before that.”
Interestingly, despite inflation, the survey showed a slight increase in confidence levels from the last quarter, 78% from 75%, which could be attributed to more and more Americans taking control of their personal finances, having a written financial plan and checking in more often with their financial advisor, according to BMO.
“Prices across the board – from cars and gasoline to groceries and other everyday essentials – are rising at the fastest pace since the 1980s. Consumers must think differently about their finances in this inflationary environment,” Paul Dilda, head of consumer strategy for BMO Harris Bank, was quoted as saying in a press release. “Seek advice from a financial expert on ways to successfully manage your personal finances, from learning ways to save and which types of accounts to use, to moving from knowing what you should do with your money, to actually doing it. By learning about what do to differently, and what not to change, during a period of inflation, consumers can maintain momentum toward their financial goals.”
In terms of how Americans intend to offset the increased costs of living, 80% plan to change their actions to offset the impact of inflation and rising costs of everyday essentials. Of these, 42% are changing how they shop for groceries, including opting for cheaper items, avoiding brand names and buying only the essentials; 46% are dining out less; 31% are driving less; 23% are spending less on vacations or canceling them altogether and 22% are taking measures such as canceling subscriptions to the gym, cable, etc.
The survey also noted that women are more likely to make lifestyle changes than men.
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BMO recommends these practices to manage finances through the inflationary periods, including planning and budgeting:
- Review and adjust your budget to account for the rising cost of everyday items.
- Assess your ongoing expenses such as streaming services, cable subscriptions, gym memberships or cell phone plans to negotiate lower prices or see if any of these can be reduced or eliminated.
- Postpone big-ticket purchases. Some price increases may be temporary, in which case it may be worthwhile to wait.
- Review monthly payments, such as the homeowners’ or auto insurance, to ensure it is appropriate and you are getting the most for your money.
- Speak with an expert to help ensure your savings and spending goals are still on track
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