Many Americans have become concerned with rising food, housing, utilities, and transportation costs triggered by skyrocketing inflation in 2022.
While inflation moderated in 2023, prices have remained high, creating a financial strain for most households.
Consumer debt levels have also increased, and credit card debt is mounting as consumers rely on high-interest credit to make ends meet.
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Households across all age groups are feeling the squeeze, but seniors and retirees living on fixed incomes are particularly vulnerable to rising living costs.
Many retirees rely on Social Security for consistent monthly income, but find it doesn’t stretch as far as it once did.
There is a well-known threat of the Social Security trust funds running dry, and political discussions have hinted that federal funding for the program could face some cuts.
Retirees are finding it difficult to make ends meet and are increasingly saddled with debt in their later years.
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American retirees without savings are more vulnerable to debt
Saving for retirement spans decades, and it can be challenging 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 of the past decade have made it particularly challenging for workers to save enough.
The Fed Reserve’s 2022 Survey of Consumer Finances found that debt levels are rising among all age groups but are particularly pronounced among Americans 65 and older. Debt levels have quadrupled since 1992 for those aged 65 to 74, a staggering indication of seniors’ finances.
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In keeping with 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 rising debt issue, especially for those living off modest fixed incomes.
Having guaranteed income through an annuity or workplace pension plan strongly correlates with overall well-being during retirement, but both options require decades of planning.
Some retirement experts advocate for expanding the program or increasing Social Security taxes on high-net-worth earners, but that seems unlikely to happen under the incoming Trump Administration.
Social Security is insufficient for retirees but is unlikely to change soon
Many seniors were incensed 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 increased Social Security payments by just 3% will not be enough to offset the true increase in the cost of living.
Food, housing, and healthcare prices have risen the most in recent years, and seniors spend most of their money on these three categories.
Related: Social Security payments will be affected soon by a COLA change
Many retirees rely heavily on Social Security to supplement their savings: it represents roughly half of the total retirement income for the 80% of seniors receiving Social Security.
However, given that the average Social Security payment received in 2024 was around $1,900 per month, seniors live off of far more modest incomes than the average American.
While Social Security was already projected to become insolvent by 2034, and payments would have to decrease by 25%, the incoming Trump Administration could expedite this issue. Trump’s proposed tax cuts could mean Social Security insolvency by 2031.
Economists have proposed solutions to offset the debt burden placed on retirees by expanding Social Security. Most involve increasing taxes on those within the highest tax brackets — a notoriously unpopular policy initiative among Republican policy makers.
Retirees hoping for Social Security expansion will likely need to wait a number of years.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
