Let’s say you’re in great shape – financially speaking. You’ve acquired a middle-class lifestyle and enjoy all the benefits that come with it: a nicer home, financial stability, a growing nest egg.
But inflation invades us all; and, according to experts, there are some things you won’t be able to afford in the next five years.
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“I’ve seen how much the middle class is taking advantage of some important aspects of life right now,” said Alyssa Huff, real estate expert and owner of Sell House As Is. “It’s like owning a home with manageable mortgages. , send their kids to college with student loans, have health coverage, save for retirement, and even treat themselves to occasional luxuries.”
But looking ahead, she says she’s concerned about the future: “Rising housing costs, tuition fees, health care costs and inflation could make life more difficult for middle-class families in the over the next five years. »
Huff said it could become more difficult to buy a home, send children to college or save for retirement. Even simple pleasures like going on vacation or buying nice things can become more difficult.
The good news? Knowing that these increasing costs will occur can help you better prepare.
“As someone who cares deeply about financial well-being,” Huff said, “I urge the middle class to start planning wisely now to weather these potential storms and keep their dreams within reach.”
Here are some costs that will continue to rise that you should keep an eye on.
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Extended family trips
“I would say that the tradition of extended family travel, especially abroad, will likely increasingly be something that the middle class cannot afford in the years to come,” said David Kemmerer, CEO of CoinLedger . “In many ways, it already feels like the traditional family vacation has fallen by the wayside over the last decade due to a number of factors, including Covid and inflation.”
But because middle-class incomes aren’t as high as they once were, he said money that might previously have gone toward travel will likely go toward things like housing and other necessities.
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New cars
Melanie Musson, financial expert at Clearsurance, said the middle class won’t be able to afford a new car in the not-too-distant future.
“Vehicle prices have increased dramatically over the past four years and will likely continue to become more expensive,” Musson said. “Safety features, autonomous technology and EV batteries are contributing to rising prices. »
Lessons in private schools
According to Jake Hill, CEO of DebtHammer, if inflation and high demand continue on their current trajectory, the middle class will not be able to afford private school tuition for the next five years.
“Tuition costs have been rising steadily for years,” he said, “and it is very likely that they will exceed middle-class income in the near future.”
He says this is especially true when you consider a middle-class family’s overall expenses, including ever-rising housing costs.
Home ownership and real estate
“Honestly, the way things are going, a mortgage or buying a home might be something the middle class won’t be able to afford in five years,” said Carter Seuthe, CEO of Credit Summit.
Especially in some high-demand areas of the country, he said, it’s still quite difficult to get an offer accepted on a home unless you bid well above the asking price, giving up key elements of inspection and sale, cash offering, etc.
He said: “I certainly see home ownership becoming something increasingly out of reach for the average middle-class citizen. »
Speaking of owning property, according to David Brillant, a tax, trust and estate attorney at the Brillant Law Firm in California, one area to watch closely is real estate.
“With recent adjustments to property tax laws, such as those brought about by Proposition 19 (in California), and potential changes to the Unified Estate and Gift Tax Credit,” he said , “There is real concern that owning and transferring property ownership will become increasingly difficult for the middle class.
“My work with my clients to navigate these tax changes has highlighted how significant the financial burden can be, particularly with the proposed reduction in the Unified Credit, making substantial donations now more attractive in the near future.
Health care costs
Other critical areas to watch, experts say, are long-term care and health care costs.
“These expenses have been steadily increasing, outpacing general inflation rates for years, and there are no signs of this trend reversing,” said Mike Kojonen, financial advisor and owner of Principal Preservation Services.
He added that many middle-class families could find themselves ill-prepared for the financial strain of long-term care, whether for themselves or their aging parents.
“My work with clients has highlighted the importance of integrating health care planning into an overall retirement strategy,” he said. “Without proper planning, affordability of needed long-term care services could become a significant challenge, potentially depleting retirement savings prematurely. »
Leisure and travel in retirement
For those considering retirement in the next five years, Kojonen said another aspect to consider is leisure and travel in retirement.
“For many, the desire to explore and enjoy leisurely activities is a central part of their retirement dreams. »
However, with rising costs and inflationary pressures affecting everything from airline tickets to accommodation and dining, what was once seen as an achievable goal for the middle class could soon become a luxury, a he declared.
“This change could lead to necessary adjustments in retirement planning, highlighting the need to build a stronger savings strategy to meet the higher costs of leisure and travel.”
“Safe” investments for retirees
According to Kojonen, the concept of “safe” investments could also change.
“Traditionally,” he said, “bonds and fixed income securities are considered the cornerstones of a retiree’s portfolio, providing them with both income and stability.”
However, with historically low interest rates and rising inflation, he said the real returns on these investments may not keep pace with inflation.
“This reality poses a risk to the preservation of the purchasing power of many middle-class retirees,” he explained. “When advising our clients, it has become increasingly important to explore diversified investment strategies that can provide both growth and inflation protection, ensuring their retirement savings can support their lifestyle and their objectives.
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This article was originally published on GOBankingRates.com: 7 Things the Middle Class Won’t Be Affordable in the Next 5 Years
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