Are You Keeping Up With the Rising Cost of Living?

For Mark Roberts’ Use: The economy shows signs of improvement, and the inflation rate remains extremely low. Even so, many Americans are concerned that their incomes are falling behind the cost of living. Indeed, most of us have noticed fluctuating gas prices and rising food prices over recent years. No matter what the experts say about inflation, it may feel as though your personal cost of living has recently risen.

According to Pew Research, only 4 percent of Americans in the $30,000- $74,999 annual income bracket believe their incomes are rising faster than the cost of living. Thirty-nine percent of Americans in that same income bracket believe their incomes are keeping pace with the cost of living, and a whopping 56 percent feel that their incomes are falling behind the cost of living.

Among the $75,000 – $99.999 annual income bracket, only 2 percent feel that their incomes are rising faster than the cost of living. Fifty-three percent think their incomes and cost of living remain about even, and 44 percent feel that their incomes are falling short.

Things look a little better for the $100,000-and-up income bracket: Fifteen percent feel their incomes are rising faster than the cost of living, 48 percent believe the two variables remain even, and 36 percent worry that their incomes are falling behind the cost of living.

What can we learn from this study?

First, perceptions about cost of living probably vary according to income. Those who earn more typically have higher lifestyle expectations. And yet, it appears that a lower income is associated with more worries about keeping up with the cost of living. This may be due to the fact that the prices of fuel and food affect everyone about equally, and therefore hit lower earners the hardest.

Second, we should all take note of our own cost of living with regard to retirement planning. If you expect to maintain a reasonably comfortable lifestyle in retirement, remember that the cost of your current lifestyle will likely rise in coming years. Make sure your expected retirement income covers not only your current expectations, but the cost of that same lifestyle in the future. Review these issues with your financial advisor, and make sure your projected income will be sufficient when it’s time to quit working.