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7 things the middle class won’t be able to afford in the next 5 years
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Let’s say you’re doing well – financially speaking. You’ve acquired a middle-class lifestyle and enjoy all the perks that come with it: a better house, financial stability, a growing nest egg.
But inflation affects us all; and, according to experts, there are things you will not be able to pay more in the next five years.
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“I saw how the middle class currently enjoys some important aspects of life,” said Alyssa Huff, real estate expert and owner of Sell the house as is. “Like owning homes with manageable mortgages, sending your kids to college with the help of student loans, having health coverage, saving for retirement, and even indulging in occasional luxuries.”
But looking ahead, she said she is worried about the future: “Rising housing costs, tuition fees, healthcare expenses and inflation could make life more difficult for middle-class families over the next five years.” .
Huff said it may become harder to buy a house, send kids to college or save for retirement. Even simple pleasures, like vacations or buying nice things, can become more challenging.
The good news? Knowing that these rising costs will happen 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.
Extended family trips
“I would say that the tradition of traveling with extended families, especially abroad, is likely to be increasingly something that the middle class cannot afford in the coming years,” said David Kemmerer, CEO of CoinLedger. “In many ways, I already feel that traditional family holidays have been sidelined over the last decade due to a number of factors – Covid and inflation being some of them.”
But with middle-class income not reaching as far as it once did, he said money that previously might have been devoted to travel will likely go toward things like housing and other necessities.
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New cars
Melanie Musson, finance specialist at Sale offsaid that the middle class will not be able to afford a new car in the not-so-distant future.
“Vehicle prices have increased dramatically over the past four years and will likely continue to get more expensive,” Musson said. “Safety features, autonomous technology and EV batteries contribute to rising prices.”
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Private school tuition
According to Jake Hill, CEO of Debt HammerIf inflation and high demand continue on their current trajectory, the middle class will not be able to pay private school fees in the next five years.
“Tuition rates have been rising steadily for years,” he said, “and are highly likely to surpass middle-class income in the near future.”
He said this is especially true when looking at the big picture of a middle-class family’s expenses, including rising housing costs.
Homeownership and real estate
“Honestly, the way things are going, a mortgage or home purchase may be something the middle class won’t be able to afford in five years,” said Carter Seuthe, CEO of Credit Summit.
Especially in certain high-demand areas of the country, he said, it is still very difficult to have an offer accepted on a home unless you are bidding well above the asking price, forgoing key elements of the inspection and sale, offering in cash, etc.
He said: “I can certainly see that owning a home is becoming something that is increasingly out of reach for the average middle-class person.”
Speaking of owning property, according to David Brillant, a tax, trust and real estate attorney at Brilliant law firm In California, one area to watch closely is real estate.
“With recent adjustments to property tax laws, such as those prompted by Proposition 19 [in California]and potential changes to the unified credit against estate and gift taxes,” he said, “there is a real concern that owning and conveying real estate will become increasingly challenging for the middle class.
“My work with clients in navigating these tax changes has highlighted how significant the financial burden can be, especially with the proposed unified credit reduction, making substantial donations now more attractive in the near future.”
Healthcare costs
Other critical areas to watch, according to experts, are long-term care and healthcare costs.
“These expenses have been rising steadily, outpacing general inflation rates for years, and there are no signs of this trend reversing,” said Mike Kojonen, financial advisor and owner of Main preservation services.
He said many middle-class families may not be prepared for the financial pressure of long-term care, whether for themselves or their aging parents.
“My work with clients has highlighted the importance of integrating healthcare planning into a comprehensive reform strategy,” he said. “Without adequate planning, affordability of needed long-term care services can become a significant challenge, potentially depleting retirement savings prematurely.”
Leisure and travel in retirement
For those looking to retire 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 leisure activities forms a central part of their retirement dream.”
However, with rising costs and inflationary pressures affecting everything from airfares to accommodation and meals, he said that what was once considered an achievable goal for the middle class could soon become a luxury.
“This change could lead to necessary adjustments in retirement planning, emphasizing the need to build a more robust savings strategy to accommodate higher leisure and travel costs.”
“Safe” investments for retirees
According to Kojonen, the concept of “safe” investments may also change.
“Traditionally,” he said, “bonds and fixed income have been seen as pillars of a retiree’s portfolio, providing income and stability.”
However, with interest rates at historic lows and inflation on the rise, he said real returns from these investments may not keep pace with inflation.
“This reality represents a risk to the preservation of the purchasing power of many middle-class retirees”, he explained. “When advising clients, it has become increasingly important to explore diversified investment strategies that can offer both growth and protection against inflation, ensuring that your retirement savings can support your lifestyle and goals.”
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This article originally appeared on GOBankingRates. with: 7 things the middle class won’t be able to afford in the next 5 years