Northwestern Mutual: Many Americans still struggling with inflation

A recent survey by Northwestern Mutual reveals consumers’ constant struggles with high inflation. In fact, according to the company’s 2025 Planning & Progress Study, inflation continues to sting in America, with many people saying that elevated prices in the grocery aisles, at the gas pump and elsewhere are having a “large impact” on their finances. And for those who don’t own a home, the majority said that homeownership will never be affordable.

The survey also finds that half (51%) of U.S. adults believe that inflation will increase this year, more than double the 25% who expect inflation to decrease and the 24% who expect it to stay the same. Furthermore, two-thirds (65%) of U.S. adults said that inflation is the dominant concern that could impact their finances this year, and more than four in 10 (44%) rank inflation as the #1 obstacle to achieving financial security.

For the second year in a row, more than half (52%) of Americans believe their household income is growing more slowly than inflation. That’s more than four times greater than the 11% who say their income is growing faster than inflation, while three in ten (28%) believe their income is on pace with inflation, the survey said.

And a large majority (84%) of Americans said that they have experienced elevated grocery costs in the last three months. Nearly seven in ten (68%) experienced elevated utility costs, while 60% experienced elevated gas costs, 52% experienced elevated housing expenses and 15% experienced elevated childcare expenses. When considering responses solely from Gen Z and Millennial parents, the childcare price sting percentage jumps to 36%.

”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.”

Inflation leaving many feeling financially insecure

Meanwhile, three in ten (30%) Americans said that they do not feel financially secure. This is a modest improvement from the 33% who said the same last year, the survey pointed out. But notably, last year’s number represented the highest level of financial insecurity recorded in the study’s history. The Northwestern Mutual Planning & Progress Study started in 2009 and began measuring financial security using its current methodology in 2012.

The negative effects of high inflation

So why is high inflation such a major threat to many Americans who are seeking to achieve their financial goals? High inflation poses a significant threat to many Americans aiming to achieve their financial goals for several reasons, said Hollee Ann Kier, co-founder and wealth management advisor, Artistry Wealth Management, Northwestern Mutual. For example:

Inflation can erode purchasing power and reduce the value of money over time, meaning that the exact amount will buy fewer goods and services in the future. Eroding purchasing power impacts savings and reduces the actual value of income, added Kier. According to Northwestern Mutual's 2025 Planning & Progress Study, more than half (51%) of U.S. adults believe inflation will increase in 2025, which indicates a widespread concern about the diminishing value of money.

As prices for goods and services rise, the cost of living increases. “Increased cost of living due to inflation can make it more difficult for individuals to cover their daily expenses, let alone save for long-term goals like retirement, education, or home ownership,” said Kier. The study found that 65% of U.S. adults say inflation is the dominant concern impacting their finances this year, and 44% rank inflation as the #1 obstacle to achieving financial security.

Inflation can significantly impact savings and investments by diminishing the actual returns on savings and investments. For example, Kier pointed out, that the real return is negative if an investment returns 5% but inflation is 6%. “More than half (52%) of Americans believe their household income is growing slower than inflation, which further complicates their ability to save and invest effectively,” she said.

High inflation often leads to higher interest rates as central banks attempt to control inflation, Kier said. Variable interest rates can increase the cost of borrowing, making loans and mortgages more expensive.

High inflation creates economic uncertainty, making it difficult for individuals to plan for the future financially. It's challenging for someone to estimate how much they need to save when the future value of money is unpredictable. “Financial planning is always best done with a trusted financial advisor, and even more crucial during times of economic uncertainty and high inflation,” Kier said.

Americans improve their financial discipline

Americans have improved their financial discipline year-over-year. Today, half (49%) of U.S. adults consider themselves to be ‘disciplined planners.’ This is an improvement over the 45% who said the same last year, and reverses what was a steep five-year decline in financial discipline going back to 2020.

“Financial insecurity continues to be an epidemic in America,” said Roberts. “While the improvement in discipline is encouraging, we know that there are more than 100 million Americans who are uninsured or underinsured. We also know the gap between people’s retirement savings and their goals is significant. Now is the time for people to act to improve their own money habits and financial plans. Our industry needs to act, too – growing the number of advisors who can provide trusted advice so we can all help more Americans build financial security.”

Helping clients deal with rising costs

So, what are some of the steps that financial advisors can take to help their clients deal with their inflation concerns and keep them on track toward achieving their financial goals?

Advisors should work with clients to review and adjust budgets, said Kier. “Regularly reviewing and adjusting clients' budgets to account for rising costs can help them manage their expenses better and identify areas where they can cut costs or save more,” she said.

In addition, advisors should:

• Encourage clients to increase their savings rates to help counteract the erosion of purchasing power over time. “Even small increases in savings can have a significant impact in the long run,” Kier said.
• Continuously revisit and adjust long-term financial plans to ensure that they remain realistic and achievable despite inflationary pressures. “This practice includes reviewing retirement plans, education savings, and other long-term goals,” Kier said.
• Provide clients with information and education about inflation and its impact on finances can empower them to make informed decisions. Understanding the economic climate can help clients stay calm and focused on their long-term objectives.

These steps aid financial advisors in helping their clients navigate the challenges posed by high inflation and remain on track to achieving their financial goals, Kier said. “Our 2025 Planning & Progress Study finds that even the wealthy are not immune to inflation, with only 19% of millionaires in America saying their income is growing faster than inflation. The responses underscore the importance of sound financial advice and planning in managing inflationary pressures.”

The 2025 Planning & Progress Study was conducted by The Harris Poll on behalf of Northwestern Mutual among 4,626 U.S. adults aged 18 or older. The survey was conducted online between January 2 and January 19, 2025.