Rising inflation pushed Americans to pick between paying their bills or saving for the future: Allianz

Concern about the risk of recession and market volatility will drive investment decisions in 2023

Despite signs that inflation is cooling, 82% of respondents said they were worried that rising inflation would keep pressuring the purchasing power of their income, according to a recent survey. (iStock)

Inflation and rising costs are why many Americans said they focused on paying bills rather than saving for the future, according to a recent survey.

Sixty-seven percent of respondents said that their current financial issues took precedence over saving for things like retirement, according to a survey by the Allianz Life Insurance Company of North America. In addition, the pressure of keeping up with rising costs is why 45% said they dipped into their retirement savings to make ends meet. 

Inflation hit an record-high of  9.1% last June, and has since leveled off and slowed down in a sign that the Federal Reserve’s monetary policy is working to curb rising costs.  Despite signs that inflation is cooling, 82% of respondents said they were worried that rising inflation would continue to pressure and "reduce the purchasing power of their income in the next six months," according to the survey.

"Reducing retirement savings should be a last resort, short-term answer for inflation because it could have a significant detrimental effect on financial security for years to come," Kelly LaVigne, Allianz Life vice president of consumer insights, said in a statement. "This is why it is so important to work with a financial professional to achieve long-term financial stability with a written plan that incorporates strategies for risks like inflation."

If you are struggling with high inflation, you can consider taking out a personal loan to pay down debt at a lower interest rate, potentially reducing your monthly payments. You can visit Credible to find your personalized interest rate without affecting your credit score.


Recession risk remains a concern

Beyond rising inflation, 62% of respondents said they believed a major recession remains in the cards for the U.S. economy in 2023.

This continued market volatility is why 65% of Americans said they would have to reconfigure their retirement and investment plans in 2023, an increase from 57% saying the same for their 2022 investments.  

In addition, concerns over where the U.S. market is headed is why 64% of respondents said they "would rather have their money sit in cash than endure market swings," according to the survey.

"It’s understandable that people are worried about market risks as we start the new year, and while it might feel a little counterintuitive, it’s important to remember that money left out of the market – even in times of volatility – isn’t working hard for you," LaVigne said. "This money, while subject to potential market drops, will also miss out on gains when the market recovers.

"Timing the market is always a bad idea," LaVigne continued. "Missing the days when the market performs best during recovery could postpone retirement for years."

If you are looking to reduce your expenses in the current economy, you could consider using a personal loan to pay down debt at a lower interest rate, saving you money each month. You can visit Credible to compare multiple lenders at once and choose the one with the best interest rate for you.


Cut spending to increase savings, expert says

With so much uncertainty ahead, the best action for Americans is to focus on things they can control, according to one financial expert.

"With a possible recession on the horizon, prioritize cutting spending and increasing savings," Gabe Krajicek, Kasasa CEO, said. "Crunch the numbers before increasing contributions to your 401K or IRA or anything tied to the long term for now, but make sure you are taking advantage of all employer-matched contributions.

"While the economy’s future cannot be predicted, consumers can make active decisions to prioritize their retirement funds and be prepared for wherever the future of the economy may hold," Krajicek continued.

If the current economy is getting in the way of your retirement savings, consider paying off high-interest debt with a personal loan at a lower interest rate. Contact Credible to speak to a personal loan expert and get all of your questions answered.


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