Economy

Half of Americans Would Go Broke in a Month If They Lost Their Income

Paul Ausick

Published: October 11, 2023 1:33 pm

Despite rising employment levels, the vast majority of Americans still face a host of financial challenges in 2023. Nearly 40% of respondents to a recent survey say they have gone deeper into debt this year, and less than half say they are earning enough income to live comfortably.

More than half (51%) say that if they lose their jobs, they will run out of money after just one month. Only one in four say they have enough money to last a year or more.

Clever Real Estate surveyed 1,000 Americans in August, asking about their 2023 and 2024 financial goals and personal finances. Their answers are scary.

Cutting Spending

The vast majority of Americans (93%) report cutting spending in 2023. Spending on dining out, entertainment and clothing fell by more than 50% in each category. More than a third (34%) say they cut spending on groceries.

In 2024, 88% of Americans expect to cut their spending. Dining out gets the largest reduction (51%), with entertainment (48%) and clothing (37%) cuts close behind. A quarter expects to cut grocery spending next year. (See the best cities for living on Social Security alone.)

Deepening Debt

More than two-thirds of Americans (69%) are worried that they will not be able to afford everyday goods if prices continue to rise. Two-thirds say that a $10,000 windfall would not cover their financial needs. More than a third (35%) expect to be in debt for the rest of their lives.

Required repayments on student loan debts begin next year, following a three-year suspension. A large majority (86%) of borrowers expect the repayments to have a negative effect on their finances. About 40% say they will have to work more to increase income to meet those payments. More than a third expect to run up other forms of debt when payments restart.

Collapsing Net Worth

The combination of inflation and higher debt means a smaller portion of income is going into savings. Almost half of Americans (49%) say they have dipped into their retirement or emergency savings in 2023. That results in little to no net worth.

How big a problem is this? One in four Americans has a net worth of $0 or less, including nearly a third of baby boomers.

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Retirement Is Not an Option

Most Americans (53%) say they are not saving for retirement. More than 60%, including 63% of baby boomers, say that they are unlikely to have saved enough to retire. When asked the earliest age at which they could retire, 60% of non-retired Americans say 70 or older.

In 2023, the maximum Social Security benefit for a 62-year-old retiree was $2,572 a month ($30,864 annualized). At full retirement age, the maximum benefit was $3,627 monthly ($43,524 annually). At 70 years of age, the benefit tops out at $4,555 a month ($54,660 a year).

In order to receive those maximum benefits, someone would have had to be at the top of the Social Security contribution scale for virtually their whole working life. For all but a tiny fraction of Americans, that is a pipe dream.