25% of Americans delaying retirement due to inflation, survey says: Here's how they're offsetting rising costs

Rising inflation is taking a toll on Americans, 60% of whom say it's had an adverse effect on their finances, according to a new survey from the Bank of Montreal (BMO). Furthermore, the survey showed inflation is even causing many Americans to delay their retirement.

Thirty-six percent of respondents said their savings have been reduced because of rising costs, while 21% have specifically lowered their retirement savings, according to the bank's Real Financial Progress Index. A quarter of Americans have had to delay their retirement as a result. 

Younger Americans have also felt the most impact from today’s economy, with more than 60% of those ages 18 to 34 reducing their savings contributions.

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WHY IS SOCIAL SECURITY RUNNING OUT OF MONEY?

Social Security could provide fewer benefits than expected

As Americans are putting aside fewer savings toward retirement, the Social Security Administration (SSA) estimates that it may have to cut retirement benefits sooner than previously expected. The projected date the SSA will hit depletion was moved up to 2034, just 13 years out. The depletion date will occur when Social Security is forced to cut financial benefits by 20% due to a lack of funds.

The move is a result in lost tax revenue during the COVID-19 pandemic, as unemployment skyrocketed and labor market shortages ensued. With fewer people paying out taxes in 2020, funding for Social Security plummeted even as older workers — of the Baby Boomer generation — reached retirement age. 

For now, inflation is causing Social Security paychecks to edge higher, as it increased by its largest percentage in nearly 40 years in 2022. So far this year, Americans saw an increase of 5.9% in their payments. However, once the depletion date arrives, it will need to slash benefits in order to keep paying Americans their Social Security paychecks. 

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SOCIAL SECURITY BENEFITS COULD BE SLASHED EARLIER THAN EXPECTED

Americans are finding ways to offset the increased cost of living

According to the BMO survey, Americans are cutting their spending in several areas. Here's how:

• 42% changed how they shop for groceries, like avoiding brand names or buying only essentials
• 46% are dining out less or spending less when they do go out
• 31% are driving less because of higher gas prices
• 23% are spending less on vacations or canceling them altogether
• 22% are canceling subscriptions for services like a gym, cable and more

"Prices across the board – from cars and gasoline to groceries and other everyday essentials – are rising at the fastest pace since the 1980s," BMO Harris Bank Head of Consumer Strategy Pail Dilda said. "Consumers must think differently about their finances in this inflationary environment. 

"Seek advice from a financial expert on ways to successfully manage your personal finances, from learning ways to save and which types of accounts to use, to moving from knowing what you should do with your money, to actually doing it," he added.

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