As Inflation Edges Down, the Repercussions Linger

While high inflation shows some signs of slowing in 2023, it may take consumers a significant amount of time to recover—the latest semiannual AARP Financial Security Trends Survey finds.

AARP has been monitoring the financial security of adults ages 30-plus for the past year through its semiannual Financial Security Trends Survey.  The survey is designed to monitor the financial experiences, behaviors, and attitudes of adults ages 30-plus. It examines perceptions of overall financial well-being, debt, emergency savings, retirement savings, expenses, and financial worries. Fielded across all 50 states and the District of Columbia, the survey includes oversamples of Black and African American adults, Hispanic and Latino adults, Asian American adults, and LGBTQ+ adults.  

The latest survey, conducted in January 2023 among 7,898 adults, reveals that overall sense of financial security remains lower than this time last year, with 58% rating their financial situation as good or excellent, compared to 61% in January 2022.  However, there is some indication that people are feeling a bit better about financial matters than they have in recent months.  Near the height of inflation last July (2022), a full one-third (33%) of respondents said their financial situation was worse than it was a year before, while this past January (2023), the percentage fell to 29%. This January 2023 number, however, remains higher than the 22% of January 2022 respondents who reported a year-over-year decline in their financial situation. 

Even though overall sense of financial security did not decline further from July 2022 to January 2023, it hasn’t returned to levels seen in January 2022 before the height of the inflation spike. The main pain points stymying a full recovery appear to be increased expenses, debt payments, and a loss in savings.

Inflation Worries Linger

Despite slowing, inflation remains a concern. Three-fourths of adults 30-plus (74%) remain worried about prices rising faster than their income.  More specifically, 65% of those who indicate their finances are worse today than they were a year ago attribute their declining financial situation to higher household expenses, up from 56% who cited that cause in January 2022.  As a result of inflation, eight in ten (79%) have continued to adjust their lifestyle or shopping habits; consistent with July 2022 behaviors, 50% say they cut back on extras during the past 12 months while 46% say they cut back on basic expenses.

Inflation-Driven Debt Accumulation

Increased debt can often be an outcome in times of high inflation. Consistent with a year ago, eight in ten adults ages 30-plus carry some form of debt month over month, with credit card debt mentioned most (43%).  That said, among those with household incomes of $75,000 or more, the incidence of carrying credit card debt has increased significantly, from 37% in January 2022 to 42% in January 2023.  For all income segments, everyday expenses continue to be the most common reason for credit card debt.

Meanwhile, the average amount of credit card debt has risen from an estimated $6,941 in January 2022 to $7,538 in January 2023. Furthermore, the percentage of adults who are worried about their ability to manage their debt has increased from 42% in January 2022 to 45% in January 2023.  Worry about an inability to manage debt is especially high among those with incomes under $40,000 (59%), those ages 30-49 (56%), and women (49%).  Even those with incomes of over $75,000 feel the pressure. Among that group, those who are worried about their ability to manage debt rose from 28% in January 2022 to 33% in January 2023.  

Savings Impact

Over a year of high inflation may be taking a toll on people’s savings—from maintaining a fund for emergencies to saving for retirement. In January 2022, 34% of adults 30-plus reported not having any emergency savings on hand; by January 2023, that number had increased to 38%.  Inflation appears to have contributed to the decline in savings as 61% cite the cost of everyday expenses as a barrier to saving more for emergencies.  Meanwhile, 20% of adults who are not yet retired say they saved less for retirement this past year due specifically to inflation.  In fact, among non-retired adults who are regularly saving for retirement, the share who are saving 10% or more of their household income fell from 33% in January 2022 to 27% in January 2023.  This shift was especially pronounced among those ages 30-49. In January 2022, 30% of adults ages 30-49 who were regularly saving for retirement were putting away 10% or more; by 2023, only 22% were saving that much.

The impact of stock market volatility in 2022 also found its way into the survey results. In January 2022 just 10% attributed their bad financial situation to a decline in investment value. By July, that had jumped to 36%, before falling to 27% this past January (2023). 

Optimism, Neutrality More Prominent Than Pessimism 

Though 2022 was a bumpy financial year for many, optimism about the next 12 months is more common than pessimism. The largest segment of people, though, are those who believe that their financial situation will remain unchanged through the coming year.  Just 10% expect their financial situation to be worse a year from now, down from a high of 17% in July 2022. Most (51%) expect their situation to stay the same, while 39% believe it will actually improve. 

Methodology

Findings are based on a semiannual survey of adults ages 30-plus conducted by NORC at the University of Chicago on behalf of AARP. The January 2023 survey of 7,898 adults was conducted from January 5 through February 2, 2023. The July survey of 4,817 was conducted from July 12 through August 1, 2022, and the benchmark survey of 6,162 adults was conducted from January 7 to February 1, 2022. All samples include oversamples of Hispanic adults and Black/African American adults.  Oversamples of Asian American adults and LGBTQ+ adults were added for the first time in the January 2023 survey.

Data for the general sample were collected using NORC’s AmeriSpeak® Panel as well as its Foresight 50+® Panel; both are probability-based panels designed to be representative of adults in the 50 states and the District of Columbia. To achieve the desired oversamples of Black adults, Hispanic adults, Asian American adults and LGBTQ+ adults, respondents from the Dynata nonprobability online opt-in panel were included. The January 2023 survey included a total of 2,072 Black respondents, 1,512 Hispanic respondents, 1,087 Asian American adults, and 1,762 LGBTQ+ adults. TrueNorth® calibration weighting was used in the oversamples to combine the probability and nonprobability samples and reduce bias in the nonprobability sample. 

For more information, contact S. Kathi Brown of AARP Research at skbrown@aarp.org. Media inquiries should be directed to media@aarp.org.