By Jessica Hall
Persistent inflation has eroded Americans’ ability to prepare for their financial futures by causing them to reduce savings, take on debt and withdraw from retirement accounts.
According to a new study from Allianz Life Insurance Company of North America, 42% of Americans said they dipped into their retirement savings because of inflation.
Hispanic respondents (59%) were more likely than Asian/Asian American (51%), Black (50%) and white respondents (39%) to have withdrawn from their retirement accounts because of inflation, said Allianz, a global financial services company that sells annuities among other types of financial products.
Overall, ongoing inflation forced Americans to be more focused on their present finances than setting themselves up for the future, the survey found, based on responses from 1,005 people surveyed.
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About two in three (67%) say they are more concerned about paying bills than about their financial future. A majority of millennials (76%) are more likely than Generation Xers (64%) or baby boomers (50%) to feel this way. Millennials are those born between 1981 and 1996. Generation X are those born between 1965 and 1980 and baby boomers were born between 1946 and 1964.
“The rising cost of living is stretching American budgets,” Kelly LaVigne, vice president of consumer insights at Allianz Life, said in a statement. “Just because inflation has slowed doesn’t mean prices have gone down. In the short-term, it may be wise to delay any major purchases to keep saving toward your future and avoid taking on new debt.”
The majority of Americans say that the rising cost of living has caused them to reduce their savings. Nearly seven in 10 (69%) say they have not been able to contribute to their savings as much due to ongoing inflation. Millennials (74%) were more likely than Gen Xers (69%) or boomers (63%) to say they have not been able to contribute to their savings as much because of inflation.
At the same time, many Americans are dealing with rising prices by taking on debt. The majority of Americans (51%) say they have taken on more debt because of inflation. More millennials (65%) than Gen Xers (49%) or boomers (31%) said this. Meanwhile, Hispanic (61%) and Black (58%) respondents say they have taken on more debt because of inflation than Asian/Asian American (53%) or white (46%) respondents, the survey found.
Even with the ongoing inflationary pressures, the survey found a bright spot in Americans’ outlooks. A total of 37% say they feel good about the direction inflation is heading, up from 31% in the fourth quarter of 2023.
What’s more, fewer Americans expect inflation to get worse. In the fourth quarter, 74% said they expected inflation to get worse over the next year, but that dropped slightly to 68% in the first quarter of 2024. That was the lowest percentage expecting inflation to get worse since 2021, Allianz said.
“Inflation isn’t going anywhere — over time the cost of living always goes up — it’s just a matter of how much and how fast,” LaVigne said. “You need a long-term plan for how to address inflation and make financial decisions on behalf of your future self.”
