Think your standard of living is not the same as it used to be? You’re right about that. Americans have lost over a third of their purchasing power in the past decade, and the biggest share of that loss happened in the past three years.
For millions of retirees, and workers reaching retirement age in 2023, inflation and the rising cost of living have been particularly detrimental. While many Gen Z, Millenial, and Gen X households were forced to downsize their life to make ends meet, older Americans – some of whom had already retired – are being forced to come back to the workforce as they can no longer afford their basic expenses. Even those who saved and did everything right throughout their working years face the risk of financial insecurity in retirement, especially as we march toward another recession.
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This problem is growing worse with each passing generation, and eventually, it will hit the lives of each and every one in the United States. Today, we compiled a series of facts and starts that expose the brutally honest truth about this worrying crisis, and why most people won’t be able to retire at 65.
The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording this data in 2007. Since 1971, the U.S. dollar has lost 98% of its purchasing power, with 35% of that loss happening between 2013 and 2023. For retirees, this situation has been a living nightmare. Data from the National Institute on Retirement Security reveals that 44% of older Americans who retired in the past three years have gone back to work due to a lack of savings.
The Bureau of Labor Statistics published figures showing the number of people in the labor force who are 75 and older grew 53.7% from 2012 to 2022 and is projected to grow 96.5% between 2023 and 2033. It’s such a dramatic increase that this is the only age group projected to increase its share of the workforce, from 8.9% in 2020 to nearly 14% in 2030.
The truth is that many seniors didn’t have the retirement savings they thought they have, and that’s because they’re not expecting the cost of living to rise so much so fast. About 61% of Americans aged 65 to 75 who came back to the labor force in recent years say they are not confident they will have enough money to cover basic monthly expenses if they stop working, NIRS data reveals. Meanwhile, 51% of consumers between 45 and 75 feel they do not have enough retirement savings to last their lifetime.
The institute estimates that 27 million people nearing retirement age will see a drop in their standard of living in retirement. The dream of retiring at the age of 65 will be just that for most Americans. Each generation is getting poorer than the one before as the U.S. middle class continues to shrink. With fewer good paying jobs around, planning for a secure financial future remains out of the reality of many people, who are struggling to make ends meet right now.
This means we will only have two choices and none of them are good: Either we or until we die or we risk facing poverty in our senior years, even after an entire lifetime dedicated to our jobs. At the end of the day, this is a reflection of the decay of the American economy, and a major proof that our retirement system desperately needs to be fixed.
Article and video cross-posted from Epic Economist.