Worried workers dip into savings as most suffer financially from inflation, survey finds
Inflation is causing major hardships for the United States’ workforce, a new survey from Bank of America shows.
The survey indicates that as of July, 71% of workers in the United States are concerned that their wage growth cannot keep up with inflation, which is up from 58% of workers in February.
The 12th annual Workplace Benefits Report, “Navigating a New Era of Financial Wellness,” uses data from a February survey of 834 employees working full-time and participating in a 401(k) plan. It also uses data from a July follow-up pulse survey of 478 full-time employees participating in a 401(k).
During the 12-month period that ended in August, consumer prices rose 8.3%, with significant jumps in prices for shelter, food and medical care, according to the Bureau of Labor Statistics.
The report says 48% of workers worry that they “won’t be able to make ends meet” as the cost of living continues to increase. Across all demographics, 80% of employees indicated that they are worried about inflation and 62% were stressed about their financial situation.
In an attempt to ease these struggles, half of workers are taking extra measures to battle inflation, including dipping into emergency funds, working extra hours, looking for higher paying jobs or taking money out of their 401(k) savings.
Here are other challenges workers are facing in the United States as inflation continues its steep climb.
Retirement
Fewer than 1 in 3 employees think they have the right plan to meet their retirement spending needs and feel prepared to manage unexpected expenses, the report says. As of July, only 56% of workers are confident they will meet their retirement goals, which is down from February’s 69%.
Employees are also struggling to understand their Social Security and Medicare benefits.
Only 38% of workers responded that they understand their Social Security benefits. Workers should also be prepared that Medicare does not cover 33% of their medical costs in retirement, the report says.
Repaying debt
Respondents also indicated elevated concern about paying back credit card debts, affording mortgages and paying for a house.
Overall “feelings of financial wellness” hit a five-year low of 44%, down 13 percentage points between just February and July, the report shows. February’s report scored financial wellness at 57%, the highest in the past few years and above the 2019 pre-pandemic score of 55%.
As the Federal Reserve continues to hike rates to calm inflation, credit card users will pay more, according to a WalletHub.
Credit card rates are expected to climb the same amount as the Fed’s set rate. Consumers can expect to pay an additional $5.3 billion this year on interest alone, the analysis says. Users will pay about $20.9 billion more this year with hikes from March, May, June, July and September.
Mortgage rates, too, are sky-high — and climbing.
As of the week of Sept. 22, the average mortgage rate in the U.S. was 6.29%, up 0.27 percentage points from the previous week and up 3.41 points since this time last year, according to Freddie Mac’s data.
Workers are growing more concerned again, and their short- and long-term goals are changing as the country’s economic outlook continues to morph.
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