A recent Fidelity study found that inflation is squeezing Americans’ confidence in their retirement plans. Seventy percent of retirees surveyed say rising costs of living have eaten into their savings if they could go back in time, nearly half of retirees say they would have started saving sooner, and about a fifth say they would have prepared for inflation.
As a record number of Americans near retirement age in 2025, confidence in their retirement plans is diminishing. While two-thirds of Americans in their retirement-planning years say they are confident about their retirement prospects, that number is down seven points from a year ago amid worries about rising living costs, according to the study. More than two-thirds, or 70%, of current retirees surveyed said rising costs have eaten into their savings, with health care representing one of the largest sources of expenses in retirement.
Most pre-retirees expressed concern about health care costs, with the average American expected to spend upward of $165,000 on health care during retirement, up 5% from a year ago. Americans not yet in retirement expect they may need to be more self-reliant when it comes to retirement income compared to current retirees. According to Fidelity, over 60% of pre-retirees are uncertain how their retirement savings will last.
Looking back, two-thirds of retirees said they would advise others to save for retirement as soon as possible—even in small increments. According to the study, if they could go back in time, almost 40% of today’s retirees say they would start saving sooner, and about a fifth say they would’ve prepared for rising costs and inflation. Lingering sentiments about inflation and high costs are derailing financial confidence for some near-retirees, finds a new study by Fidelity Investments.
According to the firm’s State of Retirement Planning study, 67% of Americans in their planning years feel confident about retirement—a seven percentage point drop compared to last year. Fidelity finds that this could be attributed to increasing day-to-day costs and rising healthcare expenses.
Inflation impacts retirees’ savings confidence
The research shows that 57% of people did not plan for high healthcare costs, and 43% say Medicare covers fewer services and procedures than initially expected. Despite these concerns, 72% of recent retirees say their retirement is going as planned, and 69% admit it is more enjoyable than expected. The general sense of optimism among current retirees could be because they have multiple sources of income, including pensions, private 401(k) accounts, and Social Security benefits.
However, as pension plans phase out of workforces and Social Security moves towards potential insolvency, the picture of retirement may not be as bright for future generations. This is especially true for Gen Xers, the oldest of whom are set to retire within the next five to 10 years. Fidelity’s research found that 53% of this age group are confident in their ability to retire on their own terms, with one-third expecting to continue working in retirement to supplement their income.
The current generation of retirees could be the last to use predictable sources of income, such as pensions, as the primary way they fund retirement. The shift toward relying on retirement savings heightens the importance of grounding yourself in a financial plan as early as possible,” said Rita Assaf, vice president of Retirement Offerings at Fidelity Investments. As a result, workers in their planning years acknowledge that they’ll need to be more self-reliant with their savings and retirement income.
Sixty-one percent of those surveyed believe savings from individual retirement accounts (IRAs), 401(k)s, and other workplace retirement plans will be among their biggest income streams, compared to half of today’s retirees, Fidelity reports. Their intentions are serious, as shown by record-high account balances among IRAs, 401(k)s, and 403(b)s. The positive savings behaviors we’ve seen many Americans take, particularly over the last few years, set an essential foundation to build a successful retirement plan,” said Assaf.
“Many understandably feel overwhelmed, but this shift in retirement income strategy in large part involves a recharting of the planning process. This starts with staying involved and aware of your broader financial picture and leveraging investment strategies to help your money work harder for you potentially.
Image Credits: Photo by Eduardo Soares on Unsplash
