Yahoo Finance Living on Edge: Nearly 90% of Retirees Worried Inflation Will Eat Away Savings
A new survey on the financial challenges and concerns of retired Americans, released by Schroders, has revealed some scary statistics, including the toll inflation is taking on retirees. Here's what the survey found.
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The Schroders 2024 U.S. Retirement Survey, which surveyed 498 retired Americans between March 15 and April 5 this year, found that inflation is the top concern for retirees. Results revealed that a staggering 89% of retired Americans are deeply concerned about inflation, which is significantly eroding their assets and income. Furthermore, a concerningly high 69% of retirees are unsure about effective ways to generate income.
"Whether it's a trip to the gas station, grocery store or pharmacy, prices in the U.S. have increased noticeably in recent years, and that is particularly challenging for retirees living on fixed income sources." Deb Boyden, head of U.S. Defined Contribution at Schroders, reveals.
The study also found that only 44% of retired Americans feel they have saved enough or more for retirement, with 32% feeling that they haven't saved enough.
Inflation is a topic that has been on everyone’s minds, including President Joe Biden, after the inflation rate shot up from 1.4% in January 2021 to 9.1% in June 2022. In 2022 Biden announced his Inflation Reduction Act that saw large corporations paying a 15% minimum tax on profits earned. However, by August 2023, it was clear that this plan had not worked and Biden himself admitted failure.
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"I wish I hadn't called it that because it has less to do with reducing inflation than it has to do with providing alternatives that generate economic growth," Biden admitted on Aug. 12, 2023.
While the inflation rate has come down since August 2023 to 3.5%, retired Americans are still very concerned. For years, Social Security has been something for Americans to rely on after they stop working, but now 44% of non-retired Americans fear that Social Security will run out.
Boyden elaborates on this new fear about Social Security. She explains, "We have a crisis of confidence in the Social Security system, and it's costing American workers real money." Boyden adds, "Fear about the stability of Social Security has people walking away from money that could improve their quality of life in retirement."
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The study also found that the average monthly income needed to retire comfortably for Americans between the ages of 60 and 65 years is $4,855, yet 37% of retirees admitted that their monthly income is less than $2,500. It's no wonder that a staggering 57% of non-retired Americans are concerned about not having regular paychecks in retirement, with an additional 23% of them terrified of this. To make matters even worse, 49% of non-retired Americans in the survey admitted that they have any retirement income strategies in place for the future. Highlighting that it's not just retired Americans feeling the squeeze. Inflation is making it difficult for younger generations to save for their retirement.
In addition to inflation eating away at plans to save for retirement, many millennials (62%) are afraid to invest their money in case they lose it if the stock market goes down. Another problem millennials are concerned with is how to properly invest in their workplace retirement plans. The study found that 56% of millennials wished that they would receive more guidance from their employer on how to invest in their retirement plan.
Joel Schiffman, head of Strategic Partnerships at Schroders, encourages people to seek guidance from a financial advisor to create a suitable investment strategy that is not dictated by market volatility. Doing this will give you the peace of mind that you're covered when you enter retirement.
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