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Senior Homeowners, Retirement and the Looming Risk of Inflation

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When you retire, you assume the money you’ve worked so hard to put away is finally going to pay off. But inflation means that your money will be worth less tomorrow — and when you’re retired, that can be a major cause for concern. It could even lead to taking on debt, since your money isn’t going as far as you imagined it would.

To see how senior homeowners ages 60 to 75 are dealing with inflation, the American Advisors Group (AAG), a home equity solutions company, conducted the Modern Retirement Survey. This data is especially timely, as a recent Bureau of Labor Statistics report showed that inflation jumped 7.5% in the past year.

A negative outlook for retired senior homeowners

About two-thirds of senior American homeowners (66%) say they’re worried that economic inflation will harm their retirement.

And that worry is well-founded: 29% of these seniors believe they’ll outlive their money. Further, more than a third of respondents (37%) say they feel the need to increase their cash flow so they can live comfortably — that could mean going back to work at a time when they thought they wouldn’t have to.

Indeed, inflation can have a massive ripple effect on retirement savings. A difference of just half a percentage point in average annual inflation could translate to needing an extra $100,000 or more to get by, depending on when you start saving, when you retire, your life expectancy and several other factors.

When your money is so tied to the whims of the economy, it’s easy to wonder who else might be at risk — and on that front, 81% of senior homeowners say they don’t feel the next generation will be able to retire comfortably. But while inflation rates may calm this year, as interest rates rise and people reduce their spending, it’s still impossible to say how things will play out over the next five to 10 years as seniors continue their retirement.

And there’s one particular segment of the senior population that’s even more impacted by inflation now.

Widowed and divorced senior women fare worst

Widowed and divorced senior women answered at the highest rate across many areas in the survey. For example, 61% of widowed or divorced senior women say the cost of living is higher than they expected — that’s eight percentage points more than senior homeowners in general (53%). Going through retirement alone can also be more expensive since you might not benefit from two retirement accounts.

Having less of a financial safety net, and potentially a reduced support system in retirement, could further strain this demographic as they navigate retired life. In fact, about a third of widowed or divorced senior women (34%) also believe they’ll outlive their money — five percentage points higher than all senior respondents.

But even more worrying is the fact that half of widowed or divorced senior women say they need to increase their cash flow to live comfortably — 13 percentage points higher than seniors overall. With a gap like that, it’s clear this demographic will likely have a very different retirement than their peers.

Methodology: AAG surveyed 1,580 senior homeowners ages 60 to 75 on Dec. 8, 2021.