Inflation has pulverized Americans’ finances over the last four years, and a new study shows that’s especially true for the nation’s seniors, whose retirement accounts have been walloped.
The losses have been so severe that would-be retirees need to work an extra six years on average before they can hang up their work boots—and they can blame Washington for this financial disaster.
Much of the damage to senior’s retirement accounts has been hidden by the stock market rally of the last several years. The S&P 500 increased 45% from the first quarter of 2021 through the third quarter of this year, but almost half of that was just inflation driving stock prices higher, not an increase in real value.
The inflation-adjusted increase over that same period is 22%. Still, that’s not a bad rate of return. The problem is that people don’t put all their retirement savings into the stock market, especially as they get closer to retirement. They rely more on fixed income assets, like bonds, which have been decimated recently.
The rapid rise in both inflation and interest rates has been a one-two punch to bond returns, which have had their worst four-year run in at least a century. Ironically, seniors who thought they were being responsible by shifting their retirement savings into bonds as they got older ended up taking the worst losses.
Although positive stock returns have technically countered negative bond returns over the last three and a half years, that doesn’t factor in the lost purchasing power of retirement savings due to inflation.
Because prices have increased roughly 20% in less than four years, everyone’s dollar doesn’t go as far as it used to. Now it’s only worth 80 cents. That’s forcing seniors to reevaluate their retirement plans or risk outliving their savings.
If a person was planning on retiring with a net worth of $1 million, they now need to add almost $200,000 to their savings if they want the same standard of living they previously planned on enjoying. The typical senior nearing retirement will now have to work longer to rebuild the lost value in his or her nest egg.
Sadly, many people aren’t aware of this problem because they confuse dollar amounts with fixed value. The worst inflation in four decades is a stark reminder that the dollar is not guaranteed to hold its value at all. For example, the average 401(k) balance has risen more than $11,000 over the last three and a half years, but it’s worth $12,000 less because of higher prices.
People with pension plans are in no better shape. In fact, inflation is driving many funds to insolvency. Although total pension plan balances increased about $2.3 trillion over the last three and a half years, their inflation-adjusted value fell by $2.5 trillion, or more than 9%.
Pension plans that pay out defined benefits to retirees with a cost-of-living adjustment are now shelling out more benefits than previously forecasted but have fewer assets. That’s the fast track to bankruptcy and the dissolution of the pension plan, leaving young people who paid into the fund nothing to show for it.
It did not have to be this way, but reckless politicians in Washington created the perfect storm that sunk senior’s retirement savings.
The big spenders in Congress and the Biden-Harris administration spent the better part of the last four years spending trillion of dollars the nation didn’t have, while the Federal Reserve created the money to cover all that excess spending. That devalued the dollar and spawned 40-year-high inflation, which in turn drove up interest rates—also at the fastest pace in 40 years.
Until the profligate spending is reined up, people’s life savings will continue being pummeled by violent changes in prices and interest rates. Sadly, there’s no relief in sight right now as the Treasury just announced they anticipate borrowing more than $800 billion in the first three months of 2025 alone.
Seniors should be furious that they’re having to work years longer to foot the bill for Washington’s financial dissipation.
EJ Antoni is a public finance economist and the Richard F. Aster research fellow in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget.
Reprinted with Permission from The Daily Signal – By EJ Antoni
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
Excellent article telling the Truth. This is what happens when you let democrats run (Ruin) things. Democrats never care about Seniors (Country) or how their Illegal and Unconstitutional policies and constant tax hikes affect Seniors. Democrats only care about Power and Control.
Under democrats our Seniors live like they do in Venezuela.
20 % inflation over the Dems 4yr administration. Social security’s increase for cola is 3%!
This should be a priority for the new regime to give an immediate true cost of living increase.
Democrats and Rinos must all be severely punished for what they’ve done to us, we’re all suffering emotionally, physically or monetarily. I have faith that President Trump will come through for all of us.
The decline of the 30-year retirement plan crushed most of the senior population unknowingly until it was too late. About 20 years ago we got the idea that working for one company for 30 years was for “chumps. Job hopping was on the rise – go for the bigger paycheck not realizing that bigger paycheck was because there was no retirement plan fully funded by that company. Your retirement suddenly was your responsibility, and you put it on the back burner. It’s hard to move in with the kids or let them take care of you when the kids are living with you…
You are correct: People do NOT understand economics..so let’s educate everyone in the US. Simple explanations and get it on conservative social media so much that even the legacy media will have to start covering it! When Elon gets busy cutting departments and bloat, he needs to PUBLISH what savings “we” are getting and that money needs to go toward the debt!! Once US citizens realize how their taxes have been literally wasted I doubt the democrats can maintain a party! People are going to be mad as heck!!
We try not to touch what little is left in our investment accounts except for RMDs. COLA will be 2.5%, but Medicare premium increases 5.9%.plus the deductible increased. Supplemental health goes up $300 annually on our plan. We’re cutting every expense possible to stay in our house, and my husband still works part time. Eating out is a fantasy! I’m praying for Trump’s administration to turn some of this around!
I am an 86 yrs. old senior and I think the real Buying power of the dollar now is down to THIRTY CENTS, WHICH THE DEMOCRATS HAS BEEN ERODING SINCE 1960. THEIR DOLE-OUTS TO BUY VOTES IS THE CULPRIT. Thank God we will finally see the Republicans change the treasonous agenda of the Democrats when they rein in the DEM’s reckless spending and dole-outs to foreign countries, while our own people suffer. God bless the new Republican party headed by patriotic and brave Pres. Trump.
I hope the mention of pushing through term limits for Congress comes to fruition. It’s definitely what We The People want to happen.
I find myself longing for the days when I could afford to eat out once a month or so. When gasoline cost $1.45 a gallon not $3.45. Grocery costs followed inflation and feeding a family has become scary. Better days are comin’.
EJ Antoni is on target here. Antoni is also a regular contributor at Steve Bannon’s War Room. EJ is young & sharp, and I always enjoy his writings & War Room visits.
My dad passed away in April at 95 years of age. Still has to pay the IRS for his earnings. What a shame!
Please, do not feed any troll. Even a down vote is feeding.
“Democrats” practice every form of deception there is… while “their media” takes on “lie reinforcement” duty. Their deliberate misguidance and utter malfeasance is how we arrived at a diminished state of “governance” that cheats its’ own benefactors out of their Social Security benefits… to an extent that may prevent adequate means of retirement for millions. NEVER forget what “democrats” caused and continued to sponsor, despite obvious, growing signs of pure catastrophe.
The One World Order saw that our economy was very high compared to the rest of the world and we had to be destroyed. This was done to level the economies of the Whole World. It has worked to a degree but not as the OWO thought it would. Now we must rebuild and not listen to the failures of other countries. We need to show others what can be done and let them catch up to us! That is what will make a better world.
aarp Troll fred s. Go back to aarp.