Americans Adjust Debt Management and Investment Strategies as Inflation Continues to Pose Challenges

Adults Contributing $730 to Paying off Debt Each Month

1 in 3 Adults with Money Invested Made Changes to Investment Portfolios over Past Six Months

As inflation continues to pose challenges for American adults’ financial strategies, New York Life’s latest Wealth Watch survey has found that people are coping by adjusting debt management and investment strategies, although the financial guidance informing these strategy adjustments varies by generational cohort. The latest survey revealed that more than half of adults reported expecting their living expenses to be higher in the second half of 2022 than the first, and 61% of respondents agree that they are more nervous about their financial future now than ever before.

“Consumers are continuing to grapple with inflation and how to factor rising prices into their budgets and long-term financial strategies – so the question becomes how to navigate those costs while simultaneously creating opportunities for bolstering savings and investments to keep pace with inflation and reach financial goals,” said Dylan Huang, SVP and Head of Retirement and Wealth Management Solutions at New York Life.

Despite inflation creating uncertainty, most adults are on top of managing their debt but feel debt stands in the way of financial goals

• 66% of adults report they are currently in debt, with credit card (46%), mortgage/home loan (23%) and automobile (22%) debt being the most common.
  • Millennials and Gen Xers are more likely to report being in debt than other generations (73% and 71% respectively).
  • Currently, adults are contributing an average of $732.91 each month to pay down debt.
• Overall, those with debt are more likely to view their debt as preventing them from reaching their financial goals and they are more nervous about paying their debts in the current environment.
  • Over half (58%) of people with debt agree that their debts are preventing them from reaching their financial goals and 56% of those with debt say that they are nervous about paying their debts in the current environment.
• When it comes to debt management, a quarter (25%) of adults feel less able to manage debt compared to their peers.
  • Nearly 1 in 3 people (28%) with debt report contributing less each month towards a loan/debt payment than a year ago; those who are contributing less each month towards their debt/loan payments are contributing $297.63 less per month.
  • Gen Xers (31%), Millennials (28%) and Women (29%) are most likely to feel that they are less able to manage their debt compared to their peers.
  • 36% of adults have taken on more debt due to changing interest rates and nearly 9 in 10 adults (89%) who took on more debt due to changing interest rates say this is having an impact on their longer-term financial plans.
    • Adults who took on more debt due to changing interest rates report their ability to set a budget (47%), build an emergency fund (45%) and save for retirement (38%) are most impacted by debt.

Market changes and inflation are also impacting Americans’ investment strategies

“Given the current macroeconomic environment, with high inflation and recessionary headwinds looming, people are wondering how they can leverage their investments to stay on track with their financial goals. It’s easy to react to market conditions, but these changes may not ultimately be aligned with a long-term financial strategy,” said Huang.

• 3 in 10 adults (30%) who have money invested have made changes to their investment portfolio in the past six months.
• Among those who have made changes to their investment portfolio, 37% have moved more money into cash, followed by individual stocks (26%) and cryptocurrency (21%).
• Adults who have reported making changes to their investment portfolio in the past six months say they decided to do so because of a reaction to the stock market (35%), an increase/decrease in level of investment risk (33%), and the costs of goods/services rising due to inflation (28%) – but just more than two in five (41%) feel confident in their decision.
• When it comes to the stock market, more than two in five adults (41%) who are currently investing in the stock market report that they have pulled back on investing in the past six months.

“For early retirees, these markets can be challenging to navigate as higher interest rates have had negative impacts on traditionally safe assets, like bonds,” continued Huang. “But the silver lining is that higher rates have enabled insured asset classes like annuities to offer higher guarantees, and a blend of insured and traditional asset classes can help people weather a wider array of economic environments.”

The financial guidance helping inform these decisions varies by generation

• When it comes to financial guidance and economic news sources, individuals primarily look to their family (31%), news sources (e.g., CNN, Fox News) (23%), and financial advisors (22%).
• Those who have money invested are more likely to look towards financial advisors (37%) for financial guidance, while Gen Zers are the generation most likely to look to social media (40%).
• Regarding what type of advice holds the most influence, adults are most likely to act on advice or guidance that comes from a financial advisor (33%) or family member (29%).
  • Social media is an influential source of financial information for younger generations, with 25% of Gen Zers and 20% of Millennials saying they would act on advice/guidance they received from this channel.

“While younger generations are increasingly turning to digital tools or social media when seeking financial guidance, guidance from a trusted financial professional is still playing an important role, particularly for those who are invested in the market,” said Huang. “A challenging macroeconomic environment impacts everyone differently depending on their unique financial situation, but human guidance from a financial professional is critical to weathering any market climate and staying on track with long-term financial goals.”

ABOUT WEALTH WATCH

Wealth Watch is a recurring survey from New York Life that will track Americans’ financial goals, progress toward those goals and feelings about their ability to secure their financial futures, identifying key themes and trends that are emerging about topics like retirement planning, the role of protection-oriented solutions and the importance of financial guidance.

SURVEY METHODOLOGY

This poll was conducted between October 13 and October 15, 2022 among a national sample of 4,400 adults. The interviews were conducted online and the data were weighted to approximate a target sample of adults based on gender, educational attainment, age, race and region. Results from the full survey have a margin of error of plus or minus 2 percentage points.

ABOUT NEW YORK LIFE

New York Life Insurance Company (www.newyorklife.com), a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States¹ and one of the largest life insurers in the world. Headquartered in New York City, New York Life’s family of companies offers life insurance, retirement income, investments and long-term care insurance. New York Life has the highest financial strength ratings currently awarded to any U.S. life insurer from all four of the major credit rating agencies².

¹ Based on revenue as reported by “Fortune 500 ranked within Industries, Insurance: Life, Health (Mutual),” Fortune magazine, 5/23/2022. For methodology, please see https://fortune.com/fortune500/.

² Individual independent rating agency commentary as of 10/18/2022: A.M. Best (A++), Fitch (AAA), Moody’s Investors Service (Aaa), Standard & Poor’s (AA+).

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