24/7 Wall St. Insights
- High inflation and interest rates due to government spending have made saving for retirement increasingly difficult for Americans.
- The blame is squarely placed on the shoulders of Washington and Americans demand action to make a comfortable retirement possible.
- The single biggest threat to saving enough for retirement is rising debt levels Americans had to take on.
- Also: Are You On Track to Retire? Take This Quiz and Find Out (Sponsored)
Retirement is something we all want one day. Living a comfortable existence after a lifetime of the daily grind is something we all desire.
Unfortunately, most people say that goal is drifting further away from our grasp. Rising costs, higher inflation, and bloated interest rates make everyday living more expensive and more difficult to save for retirement. When buying the basic necessities consumes such a large portion of our income, we are unable to put enough away for retirement.
This dire situation is brought into focus in a study by the National Institute for Retirement Security (NIRS). Nearly 80% of all Americans believe “the nation faces a retirement crisis,” a massive 20 percentage point increase from just four years ago.
Economists identify multiple drivers of the post-2020 inflation spike: pandemic-related supply chain disruptions, strong consumer demand after stimulus, global energy price shocks (especially from Russia’s invasion of Ukraine), and labor shortages. Government spending was also a factor. The Federal Reserve ratcheted up interest rates at an unusual pace to control this inflation (The Fed’s rate hikes from March 2022 through July 2023 were the fastest tightening cycle since the early 1980s). The unintended consequence is that the American people face greater insecurity about their retirement prospects.
The primary cause of not saving enough for retirement is rising debt levels. The NIRS study found debt the single greatest stumbling block to saving more for retirement. Some 42% said it was a minor contributor but fully 34% pegged it as a major hurdle.
This post was updated on September 28, 2025 to clarify the causes of inflation, the details of Congressional pensions, and cumulative inflation and wage growth, as well as to update the household debt as of 2025 Q2.
Household debt is at unsustainable levels
Consumers have been forced to use debt to survive. According to the Federal Reserve Bank of New York, household debt rose to a record $18.2 trillion in Q2 2025. While mortgage balances rose $77 billion to hit $12.52 trillion reflecting the soaring cost of housing, and auto loans jumped $10 billion to $1.63 trillion, credit card debt soared $27 billion to $1.14 trillion.
That means total debt rose 0.6% in the second quarter as both housing and auto loans increase by similar percentage rates. Credit card debt, however, jumped 2.4%, or four times faster than the total amount as people turned to their credit cards just to get by.
Some 40% of NIRS respondents believe it will be much harder to retire in the future. Just four years ago, 30% felt the same way. Of course they do. According to the Bureau of Labor Statistics, cumulative inflation from Jan 2020 through Aug 2025 is around 19–20%. While wages have risen 22.7% over that same period, resulting in just 1.5% growth in real wages, it is equivalent to only a 1-2% real pay increase.
An incredible 94% of the study’s participants said inflation was the primary factor in limiting their ability to save enough for retirement, but it wasn’t the only reason. A similar percentage pointed to rising healthcare costs in retirement and another 91% identified rising long-term care costs.
Other important considerations include wages for middle-class workers not rising and fewer workers having access to a pension.
Washington is blind to retirement security risks
The blame for where Americans are today rests squarely on politicians in Washington. The NIRS study found 87% of people say politicians just don’t understand how hard it is for them to save for retirement. And why should they?
House members and Senators earn $174,000 a year, or three times the $59,000 salary of the average American. Congressional leaders make substantially more. The median net worth of the typical congressman is $500,000, and many lawmakers are millionaires.
Members of Congress participate in the Federal Employees Retirement System. After they serve at least 5 years, they qualify for a pension, and the pension amount is based on salary and years of service. A typical pension for 5 years of service is very modest. Additionally, they don’t receive their full pension equal to 80% of their final salary unless they are at least 62, at least 50 with 20 years of service, or have 25 years of service at any age. They also receive subsidies to help partially cover their health insurance premiums.
The solutions Americans are looking for
Americans want politicians to make retirement a top priority. High among the solutions politicians should take is to make it easier for companies to provide a pension. And because so many are going to have to rely upon Social Security to survive in retirement, nearly all Americans want Congress to ensure the program’s soundness.
Most people would like to take care of themselves in retirement but have major holes in their savings they need to fill. But by taking on ever-increasing levels of debt just to exist, the possibility of a comfortable retirement grow more difficult every day.
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