The top issue for Americans isn’t Social Security, taxes, or even healthcare costs.
Several financial issues are common concerns among Americans. Social Security is a big one and a hot-button issue as the election approaches. After all, the program provides much-needed income for tens of millions of Americans and is expected to run out of money in about 10 years in its current form.
Other big financial concerns — especially as the 2024 election approaches — include taxes, affordable housing, healthcare costs, and the job market. But there’s one financial concern that Americans are even more worried about, according to research by the Motley Fool’s Ascent.
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The biggest financial concern as the 2024 election nears
Inflation was by far the biggest financial concern among Americans as the 2024 election approaches, according to a July 2024 survey of 2,000 Americans by The Motley Fool’s Ascent. Respondents could select up to three different financial concerns, and 60% of them chose inflation as one of their top three. For context, the second largest concern, Social Security, was only chosen by 42% of survey respondents.
What’s more, inflation was the top concern among Gen Z, millennials, and Gen X. Only the baby boomer generation was more concerned with Social Security (and for obvious reasons). Interestingly, inflation was the top financial concern, regardless of whether respondents preferred a Democrat or Republican in the White House.
While inflation has fallen considerably from its 2022 peak, it remains ahead of the Federal Reserve’s 2% target. Since the beginning of 2020 (before the COVID-19 pandemic), inflation in the United States has caused prices to rise by nearly 22%, according to data from the Bureau of Labor Statistics, so it’s not a surprise that many Americans have no interest in seeing generationally high inflation rates return.
Inflation could impact your retirement
In simple terms, inflation reduces the spending power of your money. If you’ve saved $1 million for retirement, but inflation makes goods and services cost 20% more, your effective savings are significantly less. Even if your investments grow nicely, in inflationary periods, your real returns — after accounting for inflation — could be far less or even negative.
Social Security benefits are adjusted for inflation each year. However, the index used to compute the annual cost-of-living increase (COLA) isn’t necessarily the best reflection of how inflation impacts seniors. The CPI-E (consumer price index for the elderly) tends to rise faster over time and puts more emphasis on expenses like healthcare and housing.
You can do a few things to make sure inflation doesn’t derail your retirement. Investing in assets that are likely to match or beat inflation over time can help. For example, investing some of your fixed-income allocation in inflation-protected bonds can give you peace of mind in inflationary environments.
Keeping housing costs low and choosing not to rent can also be an effective strategy. And if you’re still years away from retirement, increasing your 401(k) or other retirement account contributions now can help you prepare for the effects of inflation down the road.
This is especially important after you retire, when most people dramatically reduce their exposure to volatile assets like stocks. By properly positioning your retirement savings for inflation, you can ensure that your lifestyle doesn’t have to suffer if inflation unexpectedly spikes higher.
