Many Americans are worried about rising costs for food, housing, utilities and transportation caused by soaring inflation in 2022.
While inflation moderated in 2023, prices have remained high, creating financial stress for most households.
Consumer debt levels have also increased, and credit card debt is rising as consumers rely on high-interest credit to make ends meet.
Don't miss the move – SIGN UP for TheStreet's FREE daily newsletter
Households of all age groups are feeling the strain, but seniors and retirees living on fixed incomes are particularly vulnerable to the rising cost of living.
Many retirees rely on Social Security for consistent monthly income, but find that it's not as good as it used to be.
There is a well-known threat that Social Security trust funds will be depleted, and political discussions have hinted that federal funding for the program could see some cuts.
Retirees find it difficult to make ends meet and increasingly fall into debt in their later years.
Shutterstock
American retirees without savings are more vulnerable to debt
Saving for retirement spans decades, and it can be difficult to determine how much money you'll need and how long your savings will last.
The rising cost of living, wage stagnation and generally high prices over the past decade have made it particularly difficult for workers to save enough.
The Federal Reserve 2022 Consumer Finance Survey found that debt levels are rising across all age groups, but are particularly pronounced among Americans age 65 and older. Debt levels have quadrupled since 1992 for those aged 65 to 74, a staggering indicator of seniors' finances.
More about retirement:
- The Average American Faces a Major 401(k) Retirement Dilemma
- How your mortgage is key to early retirement
- Some Simple Tasks Can Help You Thrive in Retirement
According to these figures, 31% of retirees indicated spending more than they can afford, almost double the 17% in 2020. Two-thirds (68%) reported they have outstanding credit card debt.
It's clear that the cost of living has become unmanageable for many older Americans, but it's unclear how to address this growing debt problem, especially for those living on modest fixed incomes.
Having guaranteed income through an annuity or workplace pension plan strongly correlates with overall well-being in retirement, but both options require decades of planning.
Some retirement experts advocate expanding the program or raising Social Security taxes on high-net-worth individuals, but that appears unlikely to happen under the incoming Trump administration.
Social Security is insufficient for retirees, but that's unlikely to change anytime soon
Many seniors were outraged when the Social Security Administration announced that the 2025 Cost of Living Adjustment (COLA) would be set at 2.5%. Retirement experts largely agree that an increase in Social Security payments of just 3% will not be enough to offset the true increase in the cost of living.
Prices for food, housing, and healthcare have increased the most in recent years, and seniors spend the most money in these three categories.
Related: Social Security payments will soon be affected by a COLA change
Many retirees rely heavily on Social Security to supplement their savings—it accounts for about half of total retirement income for the 80% of seniors who receive Social Security.
However, given that the average Social Security payment received in 2024 was around $1,900 per monthSeniors live on much more modest incomes than the average American.
Although Social Security was already It is expected to become insolvent in 2034.and payments would have to decrease by 25%, the incoming Trump administration could accelerate this matter. Trump's proposed tax cuts could mean Social Security insolvency in 2031.
Economists have proposed solutions to offset the debt burden on retirees by expanding Social Security. Most involve raising taxes on those in the highest tax brackets, a policy initiative notoriously unpopular among Republican policymakers.
Retirees hoping for an expansion of Social Security will likely have to wait several years.
Related: Veteran Fund Manager Issues Dire S&P 500 Warning for 2025
