More than half of Americans, 52%, have reduced daily spending and 44% are delaying major purchases due to inflation, according to a survey released by Greenwood Village-based Empower, formerly Empower Retirement.
As inflation hit a new high on Wednesday, at 9.1%, the July Empower survey shows how spending and saving habits have changed – sometimes markedly – in 2022.
Unsurprisingly, the vast majority of survey respondents, 85%, said they were concerned about inflation and 86% took “at least one action because of inflation”.
“For more than a decade, U.S. investment portfolios and retirement accounts have benefited from accommodative monetary policies and a strong economy,” according to the survey. “But this longest bull market in history came to an abrupt halt with the emergence of the COVID-19 pandemic in March 2020.
“Now, in the wake of soaring inflation and prolonged stock market volatility, Americans are seeing their investment account balances shrink while facing rapid increases in their cost of living. .”
The average nest egg that survey participants needed to feel secure rose 20% over the past six months, from $441,178 to $529,993.
According to the study, 21% of American workers felt in poor financial health in the second quarter of 2022; 9% felt in poor financial health in the first quarter of 2021.
“While inflation is prompting Americans to seriously rethink their investment strategy, most are not yet willing to take drastic action,” according to the survey. “Overall, six in 10 Americans (61%) have not sold their assets or investments and have no plans to.”
Here are other ways Americans deal with inflation: Creating a budget, 50%; reduced driving, 45%; switching to cheaper brands, 45%; seeking other revenue streams, 32%; speak with a financial professional, 29%; using “emergency savings” to pay for expenses, 28%; asking for a raise at work, 20%; or move to another city/state/country, 12%.
The survey drilled down into age, ethnicity and gender subsets.
“While inflation prompts young people to change their investment course, baby boomers remain stable,” according to the survey. “Faced with rising inflation, nearly half of Americans (49%) are considering changing or have already changed their approach to investing. … Only a third of baby boomers surveyed, or 33%, are considering or have made such changes in response to inflation. This contrasts with the approach favored by younger Americans: more than half of Gen Xers, 55%, and nearly two-thirds of Gen Zers, 62%, and millennials plan to change their approach to investing by response to inflation or have already done so. ”
Empower and Personal Capital, a digital-based finance company that is a subsidiary of Empower, hired Harris Poll to conduct the survey of 2,000 US citizens over the age of 18. Harris conducted the survey from April 19 to April 23.
Empower administers about $1.4 trillion in assets for more than 17 million pension plan participants and is the nation’s second-largest pension accountant by total number of participants, according to its website.
Editor’s note: Empower manages employee retirement plans for Clarity Media, owner of The Denver Gazette.