Inflation & Medical Debt Threaten Retirement Plans

Inflation and medical debt are among the top financial concerns impacting retirement planning for Americans today, reports a recent Northwestern Mutual study.

The 2025 Planning & Progress study, which explores American’s attitudes, behaviors, and perspectives affecting long-term financial security, found that just over half (51%) of Americans believe inflation will increase in 2025. Just 25% expect inflation to decrease, and 24% anticipate it staying the same.

Another two-thirds (65%) of adults list inflation as the leading concern that could impact their finances this year, and 44% rank inflation as the top obstacle to achieving financial security. This is as 52% say their household income isn’t keeping up with inflationary markets.

Even the wealthy say they’re feeling the effects of high day-to-day costs. Northwestern Mutual’s survey found that just one in five millionaires in America say their income is growing faster than current inflation rates.

“Houses, kids, groceries and gas: all of these higher prices are having an outsized impact on people’s budgets, and most Americans believe these challenges will grow in 2025,” said John Roberts, chief field officer at Northwestern Mutual. “Economists often talk about how inflation is ‘sticky,’ meaning it takes time to reverse a broad economic cycle. Our study findings show that inflation is sticky at the individual level too – it remains top of mind for people, and they get reminded of it often in their daily lives. Americans can adapt, but it requires financial planning and acting intentionally now, to enjoy today without sacrificing tomorrow’s goals.”

Other factors, like medical debt, are further eating at Americans’ pockets. Northwestern Mutual found that for the first time, Millennials are no longer as concerned with student loan debt than in years before. Instead, medical debt was listed as among the top three sources of financial liabilities for Millennial workers.

According to Northwestern Mutual, medical debt replaced personal student loan debt as a top three source of financial liability among all age groups except for Gen Z (30% Baby Boomers, 35% Gen X, 35% Millennials, and 22% Gen Z).

These groups of workers are likelier to prioritize paying down debt rather than saving (64% vs. 36%, respectively).

The findings present opportunities for retirement plan advisors to incorporate conversations surrounding healthcare costs and insurance for the years ahead, the report notes.

“The emergence of medical debt demonstrates the importance of insurance as part of a holistic financial plan for financial security,” added Roberts. “A pronounced illness or injury can have a sudden and significant impact on a person’s financial life – including younger generations. Disability insurance can help to ensure a person’s most important asset – their earning power – remains protected in a time of adversity.”

Additional results from Northwestern Mutual’s 2024 Planning & Progress study can be found here.

SEE ALSO:

Millennial Women Feeling Financial Toll of Caregiving

Retirement Confidence Dwindling Among Workers

Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.