For Mark Roberts’ Use: We have happily seen signs of a growing economy this year, but even with the inflation rate remaining quite low, many Americans have expressed concerns that their incomes are falling behind the rising cost of living. Often, our own expenditures on items like gas or food can fluctuate, and it feels as though our budgets are strained, no matter what the experts say about the inflation rate being near zero.
A survey by Pew Research found that 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 survey respondents in that same income bracket believe their incomes are keeping pace with the cost of living, and an alarming 56 percent report that their incomes are falling behind the cost of living.
In the next higher income bracket ($75,000 – $99.999 annually), only 2 percent feel that their incomes are rising faster than the cost of living. Fifty-three percent feel their incomes and cost of living are in line, and 44 percent say that income is falling short of their own cost of living.
Not surprisingly, those who fell into the $100,000-and-up annual income bracket reported feeling somewhat more confident. Fifteen percent say that their incomes are rising faster than the cost of living, 48 percent believe their income and cost of living are staying in line, and 36 percent worry that their cost of living is outpacing income.
So, what does this all mean, for you?
The first point might seem obvious. Income does impact our perceptions about the cost of living, with those who earn more having higher lifestyle expectations. On the other hand, a lower income usually triggers more worries about the cost of living, even within the same economic conditions. This is probably due to the fact that prices of things like food and gas affect everyone equally, but even the slightest fluctuation is more noticeable to those with a lower income.
With regard to retirement planning, however, we can glean much more subtle points from this study. Whatever your current lifestyle might be, you probably expect to continue similar habits after you retire. Even with inflation rates remaining very low, over a decade or two of retirement you will certainly notice a difference in your budget. So as you plan for retirement, consider not only your current income and lifestyle, but also how your retirement income will keep pace with rising prices. Schedule a meeting with us, and we can discuss ways to keep your income and budget under control throughout retirement.