The confidence many hold in their retirement plans is beginning to show signs of strain. A recent Fidelity study highlights how rising inflation and health care costs are further impacting the economic picture and reshaping retirement expectations. All these issues are triggering widespread financial unease among many pre-retirees and current retirees alike.
Confidence Slipping Amid Cost Concerns
Although two-thirds of Americans approaching retirement age are still expressing confidence in their ability to retire comfortably, that figure has declined by seven percentage points in just one year.
What’s happening? The downward shift reflects growing anxiety about impacting retirement planning timelines and savings strategies. Rising costs just compound the problem.
Current retirees aren’t immune. A striking 70% report that the rising cost of living has significantly eroded their retirement savings. This erosion is most apparent in essential categories such as housing, food, and especially health care — a sector that continues to outpace general inflation.
Health Care: A Mounting Concern
Health care expenses remain one of the most daunting line items for retirees. The average retiree can now expect to spend more than $165,000 on health care over the course of retirement, a 5% increase from just one year ago. That figure does not include the cost of long-term care, which can push total out-of-pocket expenses even higher.
This concern isn’t lost on pre-retirees. Many are revising their savings targets upward and exploring supplemental coverage options to hedge against future uncertainties. Health care inflation, in particular, is compelling many Americans to revisit, revise, and build more flexible financial plans that can be stress-tested and adjusted for medical volatility over a retirement horizon that now often stretches 25 to 30 years or more.
Retirees Say: Start Early, Save Often
For those already in retirement, hindsight offers a clear message to younger generations: begin saving as early as possible. Two-thirds of retirees surveyed said their top piece of advice would be to start retirement savings sooner, even if only in small amounts. Nearly 40% admitted they would have begun saving earlier if given a second chance, and about one in five said they would have more proactively planned for inflation and future costs.
This sentiment echoes a broader theme: retirement planning and saving isn’t a one-time event. It’s a lifelong process that requires ongoing adjustments based on economic conditions, health changes, and personal goals.
Shifting Toward Self-Reliance
Another key finding from the study is the growing sense among pre-retirees that they will need to shoulder more of the retirement burden than previous generations. More than 60% of those not yet retired doubt their savings will last throughout retirement, largely due to fears that Social Security may not be fully funded in the decades ahead. You may be interested in my video about Social Security in 2025 that also addresses the outlook for the Social Security trust fund.
Key Takeaways:
- Reassess Inflation Assumptions: Traditional retirement projections often underestimate the long-term impact of inflation. Investors and their advisors should stress-test their plans under higher inflation scenarios.
- Prioritize Health Care Planning: With costs rising faster than expected, advance planning is critical.
- Emphasize Early Engagement: Consistent, early contributions—even in small amounts—can compound meaningfully over time and provide greater flexibility in later years.
- Strengthen Retirement Income Streams: With future Social Security uncertainty, retirees should build strategies that combine guaranteed income and investment-based withdrawals.
Retirement success today requires a dynamic, proactive approach that accounts for longevity, rising costs, and evolving risks. Those who prepare with these factors in mind will be far better positioned to preserve both their wealth and their peace of mind.
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