America’s struggling middle class is cutting retirement savings, too

The rising cost of living is draining Americans’ savings and making it harder to invest for retirement.
According to a Primerica survey, 46% of middle-income households reported cutting back or pausing their savings in the first quarter due to higher expenses.
More than a quarter (27%) of survey respondents said they plan to contribute less money to their 401(k)s this year—a huge jump from the 20% who said the same in 2023. Overall, 60% of respondents believe they won’t have enough savings to retire comfortably.
The primary cause of financial stress continues to be inflation, with 88% of middle-income Americans saying that rising food prices have negatively impacted their expenses.
A staggering 67% of survey respondents said their income is falling behind the cost of living, which may have distorted their views on the U.S. economy and personal finances. For example, only 19% of respondents said the economy will be in a better position one year from now.
A “majority of households continue to take steps to address persistent inflation,” the Primerica report said. “Among adults who say their income is falling behind the cost of living, nearly three-quarters are cutting back on non-essential purchases.”
By cutting back on savings, Americans risk falling even further behind on their retirement goals, opening the door to more financial stress as they age.
Retirement is becoming a privilege
The rising cost of living has skewed Americans’ perceptions of a healthy retirement.
By 2024, Americans believe they’ll need a whopping $1.46 million to retire comfortably, according to a Northwestern Mutual study. That’s 53.5% higher than in 2020.
The worst part? The average American aged 45 to 54 only has around $254,000 saved up—putting them well short of their goals.
These numbers suggest that a growing percentage of workers will have to delay their retirement or even reverse their decision once they realize that their income isn’t enough.
According to Nicole Maestas, a professor of healthcare policy at Harvard, “unretirement transitions are not uncommon,” referring to the growing prevalence of retirees returning to the workforce.
“Under a narrow definition of retirement, 26% of retirees reverse their retirement decision, and as many as 35% of the youngest retirees do so,” Maestas said in a paper that was published in the National Library of Medicine.
“Under a broader definition, nearly 40% of retirees reverse their retirement decision, and as many as 53% of the youngest retirees do so,” she said.
These conclusions align with the findings of a Boston College study, which found that retirement planners underestimate how much income they’ll need when they stop working.