Why Income Isn’t Good Enough for Retirement Security
It seems like we prefer our good news loud.
The Roaring Twenties. A business that’s “exploding.” A party where everyone “had a blast.”
Or that old favorite:
The economy is booming!
And by some measures, the U.S. economy really does look remarkably strong right now.
S&P Global reported last week that U.S. business activity accelerated in August, with its Composite Output Index rising to 56.0 (up from 54.5 in July, anything over 50 indicates expansion). The increase was driven by stronger service-sector activity, which helped offset slower growth in manufacturing.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said businesses were reporting their fastest output growth in over four years.
Listen: That sounds great!
But there’s another set of numbers I think deserves just as much attention.
Goldman Sachs Asset Management’s latest retirement survey found that roughly 40% of working Americans say they’re living paycheck-to-paycheck. Another 40% say they’re making only moderate financial progress and are struggling to balance current expenses with long-term goals.
Nearly 60% fear outliving their savings!
Now, think about those two stories together.
Businesses are reporting some of their strongest growth in years.
Yet millions of households still don’t feel as though they have much financial breathing room.
Both things can be true at the same time.
And for anyone approaching retirement, I think that contradiction contains an important lesson:
Prosperity on paper is not necessarily the same thing as financial security.
A bigger paycheck is not financial security
We usually think of living paycheck-to-paycheck as a problem affecting households with relatively modest incomes. Blue-collar workers, students and the like.
Increasingly, that is not the case today.
Reporting on the Goldman Sachs survey found an especially surprising result among high earners. About 41% of respondents earning $300,000-$500,000 said they were living paycheck to paycheck. (Astonishingly, the percentage remained around 40% among those earning even more!)
For perspective, the Census Bureau reported that median U.S. household income was $83,730 in 2024, the most recently-available data.
So we’re talking about families earning 4-6x above the typical family, yet a significant minority of them still aren't getting ahead. That's nuts!
Obviously, we should be careful about what “paycheck-to-paycheck” means in a self-reported survey like this.
A family earning $400,000 and spending heavily on, say, a $1.5 million home, private schools for the kids and vacations in Ibiza are obviously not experiencing the same hardships as a family struggling to keep groceries on the table.
Income matters.
Lifestyle matters, too. Between the two, most people I know have a lot more control over their spending than their income... So when we hear about relatively wealthy living paycheck-to-paycheck, it's difficult to feel sympathy. (At least it is for me.)
But I don’t think “rich people spend too much” explains the whole story.
The actual Goldman Sachs report points to something broader it calls the “Financial Vortex,” which is made up of four categories of costs that have swelled since 2000 to consume a greater percentage of household income:
- Housing: from 33% to 51%
- Healthcare: from 10% to 16%
- Childcare: from 12% to 18%
- Education: from 65% to 85%
Each of these categories has become more expensive, outpacing headline inflation, since the turn of the century.
This tells us that, yes, some families certainly allow their lifestyles to expand along with their income. (Geek note: This phenomenon is known as the hedonic treadmill, and it isn't a recipe for happiness!)
But that's not true for everyone! Because cost of maintaining an ordinary middle- to upper-middle-class life has also increased substantially.
That distinction matters! A lot of financial advisors say things like "Stop buying lattes" or "Skip the avocado toast." That doesn't help a family whose cost of living has been rising faster than their income for over two decades!
Let me say this again, because it's important: High income does not equal financial security.
A high income can make it easier to build financial security. But only if you choose to do so.
And retirement saving is where this really matters, especially when we look at the likelihood that retirees outlive their savings.
Inflation doesn’t have to be dramatic to do damage
According to the Bureau of Labor Statistics (BLS), the latest Consumer Price Index (CPI or "headline inflation") showed prices running 3.4% higher in July vs. last year.
Now, that is nowhere near the inflation rates we endured just a couple of years ago.
But that thinking can let you fall into the trap: Inflation is more than the latest annual percentage.
Inflation compounds. It builds over time, like a savings account but in reverse.
According to the BLS inflation calculator, $100 today has the same purchasing power as:
- $77.59 just six years ago
- $71.47 in 2015
- $65.29 in 2010
- $51.75 in 2000
In other words, the dollar has lost nearly half its purchasing power since the turn of the century!
Here's the thing: That loss doesn’t arrive as one dramatic event. Nobody wakes up one morning and discovers half their purchasing power disappeared overnight. The numbers in the bank account don't change.
It's the numbers at the grocery store that change. The number on the insurance bill, the property tax bill, the electric and doctor bills. Those numbers creep up. Not all at once (usually), but a little here and a little there...
Then those higher prices become the new starting point for next year. With a few rare exceptions, they very rarely go back down.
Now, while you’re still working, there are at least some ways to respond. You can try to negotiate a raise, buckle down and go for that promotion, or change jobs, maybe work extra hours or even take a second job or a side gig. On the other hand, you can reduce expenses, cut back here and there. Stop buying the lattes and indulging in the avocado toast.
When you're retired, though? Most of those options are gone. Not every source of retirement income is literally fixed. Social Security, for example, has annual cost-of-living adjustments. If you're fortunate enough to have other income sources, maybe they'll increase as well.
But expenses don’t always rise at the same rate your income does.
That gap, that difference is what matters.
Imagine retiring with enough income to cover $5,000 in monthly expenses comfortably.
Then imagine those expenses gradually rising to $5,500, then $6,000, then $6,500.
Nothing catastrophic has to happen.
Your retirement can become less affordable one grocery trip, insurance renewal and medical bill at a time.
That’s the danger of slow-moving problems. Like the frog in the pot of water, things like this are easy to tolerate until all of a sudden, they aren’t. (By the time we realize they aren't, it's often too late.)
Living wealthy and having spendable savings aren’t the same thing
There’s another form of paper prosperity that becomes especially important in retirement: Your home.
For millions of Americans, a house is both the place they live and their single most valuable asset. Homeownership has been a tremendous source of household wealth.
Census Bureau data from 2019 illustrates just how significant it can be. Median wealth among baby-boomer households was about $240,900.
Exclude home equity, and median wealth dropped to just $90,060. That's right, more than half of the typical family's net worth is in their home.
Now, that is real wealth, to be sure! But there’s a practical difference between wealth you can spend and hypothetical net worth tied up in the roof over your head.
You can own a $500,000 home free and clear and still have trouble paying a $7,000 medical bill. (The median emergency fund is less than $600.)
To turn home equity into spendable money, you generally have to borrow against the property, sell it or otherwise change your living arrangement. That's not fast, and it's not easy. And it's not a step most of us are willing to take the moment an unexpected bill arrives.
Housing markets can weaken. Buyers can disappear. Selling takes time. And even if you get exactly the price you hoped for, you still have to live somewhere afterward.
I’ve talked about this problem before.
This is why I think net worth can occasionally fool us.
A large number printed on a statement can make us feel secure.
But retirement expenses don’t get paid with "net worth."
They get paid with resources you can actually access.
The real lesson behind the “booming economy”
None of this means today’s strong economic data is fake.
Businesses really are reporting stronger activity.
Household wealth really has increased.
Many Americans really are earning very good incomes.
Those things matter.
The mistake is assuming they automatically translate into individual financial resilience.
An economy can grow while your cost of living rises faster than your income.
You can earn $300,000 and spend almost every dollar.
You can own an expensive house and still be short on accessible savings.
You can look prosperous on paper while having very little margin for error.
That’s the paper prosperity problem.
And it becomes particularly important when you retire because the paycheck eventually stops.
At that point, the question changes.
It isn’t simply:
How much am I worth?
It becomes:
How much of what I have can actually help support my life – and how vulnerable is it to inflation or changing economic conditions?
That’s one reason diversification matters.
Diversification isn’t about predicting which asset will perform best next year.
It’s an acknowledgment that different forms of savings have different strengths and weaknesses – and that depending too heavily on any one source can create vulnerabilities.
A home is tangible, but not especially liquid.
Cash is liquid, but inflation gradually erodes its purchasing power.
Physical precious metals offer another set of characteristics. They’re tangible assets that can be owned directly, and they’re generally much easier to convert into cash than real estate.
That doesn’t mean gold or silver always rise in price or in value. (Spoiler alert: They don’t. Nothing does.)
And it doesn’t mean precious metals eliminate financial risk. (Another spoiler alert: They don't. Nothing does.)
It simply means physical precious metals can offer another form of diversification for people who don’t want all their retirement savings dependent on great economic conditions.
I believe that's truly important.
Because when you’re planning for a retirement that may last decades, I think boring resilience deserves a little more attention than bombastic headlines.
If you’d like to learn more about diversifying retirement savings with physical precious metals through a tax-advantaged account, request our free 2026 Precious Metals Information Kit.
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