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Inflation is Putting Retirement on Hold for Millions

Erik Sofranko

Posted on June 6, 2022 21:21

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Post-pandemic inflation is crushing the ability to save.

According to the BMO Real Financial Progress Index, a quarterly survey, about 25 percent of Americans are delaying retirement due to the rapid increase in the cost of living. Increased prices due to inflation have hindered the ability to save money. Thirty-six percent of survey respondents have had to reduce their savings to meet the rising living expenses, and 21 percent are cutting their retirement investments.

Americans have not seen this level of inflation for 40 years. The sudden increase in everyday expenses has thrown people out of their budgets, and many people who were nearing retirement during the pandemic did not take into account the potential for this kind of disruption. The younger generation has been hit the hardest.

Over 60 percent of the 18-34 year old demographic have been forced to stop saving money for retirement in order to meet their current living expenses. The rising cost of rent, utilities, gasoline, and groceries is causing a rise in U.S. credit card debt. People who cannot meet their monthly budgets are turning to credit cards at a time when interest rates are rising. Additionally, millions of Americans are at the same time carrying massive loads of predatory student loan debt that they will never be able to pay off.

However, many Americans are fighting inflation by spending less money in any way that they can. Forty-six percent are dining out less, 31 percent are driving less, 23 percent are canceling or spending less on vacations, and 22 percent are cutting their monthly subscriptions, such as Netflix.

The only way to retire comfortably is by making sacrifices during the working years. Social security is not intended to be the ultimate retirement tool. It is only a supplement. People must be proactive during their working years to ensure that they can meet their retirement goals within their desired timeline. Investing in the stock market has proven to be the most resilient and reliable tool for a long-term plan for retirement.

As pensions are trending towards becoming a thing of the past, it is up to workers to ensure they are putting enough money towards their retirement goals. 401k plans are effective, but many people are not saving nearly enough to be able to retire comfortably.

It is advisable for all adults to contribute to ROTH IRA retirement accounts if they have the money to do so. Americans can invest up to $6,000 per year into this type of investment account that can grow tax-free. As long as no withdrawals are made until age 59 and a half, there is no IRS penalty whatsoever. Financial literacy is not being taught at enough high schools, so most people are unaware of the advantages of sacrificing while young to be able to prosper when old. 

Erik Sofranko

Posted on June 6, 2022 21:21

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Source: WESH

Can inflation deflate your retirement? A financial expert weighs in.

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