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Many retirees are facing financial headwinds

A recent report focuses on retirees’ spending

Updated:

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By:
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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.

Photo by Allef Vinicius on Unsplash

Key Insights

  • Retirees’ financial well-being is in decline, with lower ratings for lifestyle satisfaction and alignment with preretirement expectations compared to previous years.
  • Credit card debt and inadequate savings are increasingly limiting retirees’ ability to maintain desired spending levels.
  • Unexpected early retirement due to health issues or company changes continues to be a prevalent challenge.

Retirees who find themselves struggling to stay on budget are not alone. A recent Federal Reserve study found a growing number of Americans are carrying credit card balances in retirement.

The most recent Spending in Retirement study from the Employee Benefit Research Institute confirms that concerning trend, revealing mounting pressures on retirees’ finances, leading to tempered lifestyles and diminished satisfaction in retirement. The latest survey, conducted among 3,661 retirees aged 62 to 75, underscores the widening gap between retirement expectations and reality.

Declining well-being and lifestyle satisfaction

Retirees rated two out of three key well-being indicators lower in 2024 than in previous years. On a 1–10 scale, average scores for lifestyle alignment with preretirement expectations fell to 5.7, compared to 6.8 in 2020. Similarly, life satisfaction in retirement dropped from 7.4 in 2020 to 6.9 in 2024.

“These spending constraints contribute to declining levels of well-being in retirement,” said Bridget Bearden, Ph.D., EBRI’s research and development strategist. 

Bearden emphasized that factors such as longer tenures with fewer employers, more years of retirement plan participation, and access to guaranteed income are associated with stronger financial outlooks.

Financial strain and rising debt

The report paints a stark picture of retirees’ spending challenges:

  • 31% of retirees in 2024 reported spending more than they could afford, a significant increase from 17% in 2020.
  • 68% of retirees with debt carried outstanding credit card balances, a concerning trend amid inflationary pressures.
  • Half of the respondents acknowledged they saved less than needed for retirement, while just 17% said they saved more than necessary.

These challenges have prompted many retirees to adopt cautious spending habits. When asked to rate their consumption philosophy, 38% identified with a strong “savings mindset,” while only 11% leaned toward a “spending mindset.”

Among the 58% of retirees who left the workforce earlier than planned, the most frequently cited reasons were health problems or disability (38%) and company changes such as downsizing or reorganization (23%). This continues a trend identified in earlier EBRI studies, highlighting the precariousness of retirement timing.

Income sources and security

Social Security remains the bedrock of income for most retirees, with 80% relying on it for about half of their total income. Beyond that:

  • 39% receive income from workplace pensions or annuities, with such guaranteed income strongly correlating with higher reported well-being.
  • Individual retirement accounts (IRAs) provide income for 20%, while 401(k)-like plans serve 17%.
  • The median income contribution from IRAs was 10%, and from 401(k)-type accounts, 15%.

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