Americans delay retirement while wrestling with inflation

by mcardinal

Marion Bae, FISM News


New data reveals that the negative effects of 40-year high inflation are causing Americans nationwide to drastically change their lifestyles and habits. One of the most eye-opening findings is that nearly a quarter of Americans have decided to either delay their retirement or retire with less funds than they had originally hoped as they are seeing their retirement funds dwindle while the cost of living skyrockets. 

The BMO Real Financial Progress Index which is a “survey conducted by BMO and Ipsos that measures Americans’ sentiment around financial confidence,” released its quarterly report on Tuesday. 

Of those surveyed, almost 60% said their personal finances have been adversely affected by the inflation, with a quarter of those claiming a major impact. Data from Bloomberg earlier this year showed that the average American household would be forced to spend an extra $5,200 this year in order to maintain their lifestyle from last year, and inflation has continued to rise since then.

While the negative effects of inflation have been felt across the country more broadly, the data BMO seemed to find most alarming, based on the report’s title, “Inflation Causing a Quarter of Americans to Delay Retirement,” is the drastic shift in American savings, especially retirement savings. 

36% of Americans surveyed said they have had to reduce their savings due to the record high inflation, with 21% reducing their retirement savings. The figures were more disparaging amongst young adults, people between the ages of 18 and 34, 60% of whom have lessened their savings contributions, leaving them less prepared for the future. 

While only 60% of those surveyed claimed to have felt the negative impact of inflation so far, 80% said they planned to change their spending habits to offset the costs. This includes making changes to the grocery list (42%), spending less on dining out (46%), driving less (31%), spending less on or canceling vacations (23%), and canceling memberships and subscriptions (22%). The survey also demonstrated that women were more likely to make these changes than men.  

Paul Dilda, BMO Harris Bank’s head of consumer strategy said, “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,” and encouraged Americans to seek guidance from a financial advisor so that they can continue confidently toward their financial goals. 

The report suggests best practices for navigating this financial climate, including having a written financial plan, meeting monthly with financial advisors, and old-fashioned budgeting. The survey showed that there has been a slight uptick in all of these behaviors since the Q1 report.

Despite all this, the report also showed an increase in American financial confidence, rising from 75% in Q1 to 78% in Q2. The report attributes this increase in confidence to the increase of Americans using the financial tools available to take control of their personal finances, even in an uncertain financial climate.