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High Cost of Living Surpasses Retirement Preparedness as Top Financial Concern, Study Says


A recent survey of employers from the Employee Benefit Research Institute (EBRI) uncovered a major shift taking place among American companies and their workers. Instead of putting retirement readiness at the top of their list of financial concerns, they’re increasingly becoming more worried about cost of living. This shouldn’t come as a total surprise, considering the large economic shifts the U.S. has seen since 2020. Despite major improvements in the rate of inflation – the rate is down by nearly 60% from the June 2022 peak of 9.1% to 3.7% in September 2023 – increases in cost of living continue to appear across the nation.

Do you have questions about how to build a comprehensive plan for retirement? Speak with a financial advisor today.

What the EBRI Study Shows

Employers who offer financial wellness programs to their workers say they’re now seeing concerns around healthcare costs, budgeting, money management and daily living expenses. Since EBRI started this employer survey six years ago, this is the first time these cost of living-based problems have displaced preparing for retirement as the top concern for employees. Those concerns are being reflected in the financial wellness programs being offers by employers, according to the sixth annual version of the Financial Wellbeing Employer Survey.

“The continued evolution of financial wellness programs is a crucial question going into 2024, particularly with student loan payments restarting this month for many employees,” Jake Spiegel, research associate for health and wealth benefits research at EBRI, said in an October statement to NAPA’s Ted Godbout.

Cost of Living Concerns Across the Financial Landscape

These findings echo a study from earlier this year by the CFP Board, which found 9 in 10 Americans are worried about cost of living. Concerns about this, along with inflation and price increases, had 89% and 87% of the survey respondents worried, respectively, while the ability to save and invest for retirement was stressing just 69% of those surveyed. Some good news: Despite the cost of living concerns, more than one-third (34%) said they were saving more for retirement in the last year.

In September, Bank of America’s 13th annual Workplace Benefits Report found 67% of employees reported that the increase in living expenses was overshadowing any increases in their salary or wages, up from 58% in Feb. 2022. Despite the fact that inflation during September was at the lowest rate in nearly two years, prices were continuing to increase, just at a slower rate than before.

A sustainable rate of inflation would fall between 2% and 3%. The Federal Reserve has set 2% as its goal for inflation. Federal Reserve Chair Jerome Powell hasn’t ruled out hiking interest rates again to bring about lower inflation.

According to the financial services giant Fidelity, workers saving for retirement should aim to save at least the equivalent of a year’s salary by 30, three years of salary by age 40, six years of salary by age 50, eight years of salary by age 60, and ten years’ worth of annual earnings by age 67. These, of course, are guidelines, so the specifics of your situation might differ.

Bottom Line

The rapid rise in the cost of living during the past two years is pinching the pocketbooks for nearly all Americans but has been falling rapidly in the last year. Workers who’ve had to curtail or even stop saving for retirement should reconsider their financial goals to focus on saving adequately for retirement.

Retirement Planning Tips

  • A financial advisor can help you build a comprehensive retirement plan for the future. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Accounting for taxes in your retirement plan can be beneficial in the long run. Check out SmartAsset’s comprehensive guide to retirement taxes by state to learn more.

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