Growing number of retirees spending more than they can afford: survey — here’s how to save in retirement
A look at some of the savings options for people in retirement
More than a quarter (27%) of retirees are spending more than they can afford in 2022, according to a survey from the Employee Benefit Research Institute (EBRI). (iStock)
An increasing number of retirees are living beyond their means this year, according to a recent survey from the Employee Benefit Research Institute (EBRI).
More than a quarter (27%) of retirees are "spending much higher or a little higher than they can afford" in 2022, the Spending in Retirement Survey said. That’s up from 17% in 2020.
More retirees have also reported increasing their spending since 2020. This year, 27% of respondents said they have increased their essential spending, while 12% reported increasing their discretionary spending. That’s up from 2020, when 23% of respondents said they increased their essential spending and 8% said they increased their discretionary spending.
Meanwhile, 46% of retirees said they decreased either their essential or discretionary spending this year, according to the survey. Of those respondents, 87% said that concerns about inflation led them to cut back – the most common reason listed in the survey.
"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," Bridget Bearden, Ph.D., who is a research and development strategist for EBRI, said in a statement.
If you are struggling amid high inflation, a personal loan can help you pay down debt at a lower interest rate, reducing your monthly payments. You can visit Credible to compare multiple lenders and find the best option for you.
Social Security beneficiaries receive COLA increase for 2023
About 70% of respondents in the EBRI survey said that Social Security is a major source of their retirement income. And that income will increase early next year.
The Social Security Administration (SSA) announced in October that Social Security recipients will see an 8.7% increase in benefits – equating to an average boost of $140 per month – starting in 2023. This will impact roughly 70 million Americans.
The cost-of-living adjustment (COLA) – which is the highest since 1981 – was determined by inflation levels, particularly the Consumer Price Index (CPI). In September, the CPI increased by 8.2% annually, according to the Bureau of Labor Statistics (BLS). In October, the CPI slowed slightly and increased by 7.7% annually.
Though it might seem like a "raise," the COLA increase is meant to help retirees keep up with inflation, Kelly LaVigne, Allianz Life vice president of consumer insights, said in a statement.
"Miscalculating how much you can depend on Social Security benefits can have a detrimental effect on your financial health throughout retirement," LaVigne said.
If you’re saving for retirement, a personal loan could help you pay down debt at a lower interest rate, reducing your monthly expenses. Visit Credible to find your personalized interest rate without affecting your credit score.
Other ways to save in retirement
Retirees who want to avoid spending more than they can afford without sacrificing their current lifestyle may want to consider these tips.
Cut down on housing costs
For retirees, housing expenses take up the largest percentage of their monthly spending, according to the EBRI survey. Respondents said they spend an average of 30% of their income on housing.
There are several ways that retirees can reduce their housing costs, including downsizing to a less expensive home or moving to an area where the cost of living and property taxes are lower, according to U.S. News & World Report. Retirees who move into a smaller home are also likely to save on utility bills, the outlet reported.
Other ways to cut housing costs include renting out a room or basement apartment, rent out storage space in your garage or shed or reduce landscaping expenses with a low-maintenance yard.
Refinancing your mortgage may also help you – but only if it ends up saving you money in the long run. That usually means lowering your interest rate by at least 1%. And make sure to factor in closing costs as well.
If you’re interested in a mortgage refinance, you can visit Credible to check mortgage refinance rates from multiple lenders without affecting your credit.
Use senior discounts – including on insurance
Another way retirees can save money is to find out if they qualify for senior discounts, according to U.S. News & World Report.
Though many places offer lower prices for seniors, some discounts aren’t publicized, so make sure to ask.
Senior drivers can also ask their auto insurance carrier about discounts on their policy. Some providers offer incentives such as low-mileage discounts, safe driving discounts and discounts from taking additional driving courses.
Pay off outstanding high-interest credit card debt
Credit card debt was the most common type of debt held by retirees, according to the EBRI survey. Forty percent of respondents reported having outstanding credit card debt.
Retirees with high-interest credit card debt may want to consolidate their debt or pay it off with a personal loan at a lower interest rate.
You can visit Credible to compare debt consolidation options and find the best personal loan rates for your financial situation.
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