The impact of inflation has been felt by retirees and near-retirees despite a decrease from its 2022 peak. Research conducted by insurance company Prudential Financial reveals that a significant number of individuals have had to make changes to their retirement plans as a result. According to the firm’s latest survey, 43% of 65-year-olds have postponed their retirement due to inflation, while one third of 55-year-olds are considering delaying their retirement dates. These findings highlight the financial strain that inflation has placed on individuals planning for retirement.
Concerns Over Outliving Savings
One of the main worries expressed by respondents in the survey is the fear of outliving their savings. A significant percentage of individuals across different age groups, including 67% of 55-year-olds, 59% of 65-year-olds, and 52% of 75-year-olds, shared concerns about the sustainability of their savings. This underscores the anxiety and uncertainty surrounding financial security in retirement, particularly for those with limited savings and no pension to rely on.
The survey results revealed that the age 55 cohort is the most financially insecure when it comes to retirement readiness. Caroline Feeney, CEO of Prudential’s U.S. business, highlighted the deep savings shortfall faced by 55-year-olds, with a median savings of $47,950 toward retirement compared to the recommended balance of $446,565. This group is entering retirement without the security of pensions, which adds to their financial insecurity, especially considering the uncertainties surrounding the future of Social Security benefits.
While Social Security benefits are adjusted for inflation annually, the current trend of slowing inflation could impact future adjustments. The Social Security cost-of-living adjustment is estimated to be 3% in 2025, which is lower compared to previous years. However, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is used to calculate the adjustment, may not accurately reflect retirees’ actual costs, leading to potential underestimation of inflation’s impact on seniors.
There are discrepancies in the estimates for the Cost-of-Living Adjustment (COLA) for Social Security benefits in 2025. While some projections suggest a 3% adjustment, others indicate a lower percentage based on varying inflation data and calculation methods. The differing estimates underscore the complexity of accurately predicting the impact of inflation on retirees’ income and cost of living.
As retirees and near-retirees navigate the challenges presented by inflation, it is crucial for individuals to assess their financial plans and make adjustments to ensure long-term security in retirement. Planning ahead, seeking professional advice, and exploring alternative sources of income can help mitigate the impact of inflation on retirement savings. By staying informed and proactive, individuals can better prepare for the uncertainties of the future and secure a more stable financial outlook in retirement.