New Survey Shows Inflation and Inequality Are Negatively Affecting Seniors’ Retirement

A survey published by the Employee Benefit Research Institute shows inflation and inequality are hurting seniors’ retirement.

“The 2022 Spending in Retirement Survey reveals that certain measures of retiree wellbeing have stagnated or declined since the pandemic…More retirees say that spending has increased and is higher than they can afford,” explained Bridget Bearden, research and development strategist at EBRI in a statement.

Overall, more than half of those surveyed reported retiring earlier than expected. The most common reasons for retirement were the ability to retire from an affordability standpoint (29%) and having a health problem or disability not related to COVID-19 (21 %).

The survey found that 27% of retirees surveyed are spending more than they can afford in 2022, up from 17% of those surveyed in 2020. Those surveyed reported that 55% of their income goes to housing (30%) and food (25%).

The share of retirees surveyed reporting that they have reduced discretionary spending since the pandemic was down to 43% in 2022, compared to 54% in 2022. The share reporting they have reduced essential spending remained unchanged in 2022 from the 18% reported in 2020.

Among those who decreased either their essential or discretionary spending since the pandemic, the most common reason cited by roughly 90% of retirees was concern about inflation.

“Inflation appears to be a major driver of the misalignment between expectations and reality, a double-edged sword that undoubtedly increases actual spending but also reduces spending, likely out of a desire to protect future purchasing power,” said Bearden.

It is not clear if the respondents answering that inflation caused them to spend less might actually mean “consume” less as a result of higher prices, since increasing commodity prices would not normally lead to decreased net spending. Bearden explained that they did not ask the “parallel question” to those who increased their spending, and would expect their explanation for increased spending to be inflation also.

Nearly one third, (32%) of the 2022 sample reported working to some degree after retirement. The leading reasons for continuing to work past retirement were to have extra resources for an unexpected expense, greater discretionary spending, opportunities to socialize, and a sense that work is “rewarding”.

Among other findings, EBRI reported that on a scale of one to 10, on average, retirees rate their satisfaction in retirement as 7.0 in 2022, down from 7.4 in 2020.

The researchers surveyed 1,998 retirees between the ages of 62 and 75, with an average age of 66. To qualify as “retired” for the purposes of the survey, the respondent had to be either retired and no longer working, retired and employed part-time, or fully employed but considers themselves retired from a primary career.

This sample was weighted by gender, race, and income. The average net assets of those sampled was $532,000, and the median was $146,000. 50% of the sample reported having a college degree, making it notably more educated than the general public.

56% reported being married or living with a partner, and the other 44% reported being widowed, divorced, or separated.

Previous research from EBRI shows that there is a significant retirement confidence gap between married and unmarried women. In the current study, the author noted that unmarried people are less likely to have access to a financial advisor and are more likely to consider themselves unprepared for the “possibility of needing monthly income through age 90”.

The study also highlights deep racial inequality in retirement preparation. 46% of black respondents and 43% of Hispanic respondents reported less than $25,000, compared to 22% of the total sample. Black and Hispanic respondents were also less likely than average to have three months of retirement savings. Black retirees were also more likely to report that they retired later than they anticipated.

Despite increased inflation, the 2022 sample does not report greater debt anxiety than the 2020 sample. Both samples reported a combined 11% who said their debt was either “crushing” or “unmanageable”. However, 27% of the 2022 sample said they are spending either “much higher” or “a little higher” than they can afford, compared to 17% in 2020.

Fewer respondents reported spending less since the pandemic in 2022 than 2020. 54% in 2020 said their spending decreased “somewhat” or “significantly” compared to 43% in 2022 since the pandemic. Those who decreased spending in 2022 cited “concern about inflation” as the leading reason, with 55% describing it as a “major reason”.