Affected by rising living costs and lagging wage growth, U.S. residents’ ability to save has declined sharply, with the latest personal savings rate falling to a multi-year low.

With essential expenditures such as food, energy, and healthcare continuing to rise, inflation is escalating again, and the gap between people's income and expenditure is widening. To maintain daily life, more and more Americans are relying on credit tools and even drawing on their retirement savings, resulting in a significant deterioration in the overall financial health of residents.

The savings rate has plummeted, hitting a level rarely seen in decades.

The U.S. Bureau of Economic Analysis released data on Thursday (May 28) showing that the U.S. personal savings rate was only 2.6% in April. The personal savings rate is the percentage of a household's after-tax income that is saved after deducting all consumption expenditures. This figure has continued to decline from 3.2% in March and 5.8% in the same period last year.

Heather Long, chief economist at the Navy Federal Credit Union, said she initially suspected an entry error when she first saw the data, which is at a historically low level.

Heather Lang stated that, looking back over the past 65 years, excluding the period of nationwide retaliatory consumption in 2022, the US personal savings rate has almost never fallen to its current level.

The last time a similar low point occurred was in June 2022, when the savings rate was 2.2%. At that time, US inflation hit a new high, coupled with subsidies flowing into households' accounts during the pandemic, and a surge in consumer spending after the full resumption of social activities, leading to a sharp decline in the savings rate. Now, history is repeating itself, and households' savings capacity is once again flashing red lights.

Prices are rising across the board, and fixed expenditures are squeezing residents' income.

High prices for essential goods and services in the United States are currently a major factor dragging down savings. Daily expenses such as food, utilities, and gas continue to rise, while the escalating situation in Iran is further pushing up gasoline prices across the country, adding to the burden on people's lives. According to the American Automobile Association, as of Thursday, the average price of gasoline in the United States reached $4.43 per gallon.

Heather Lang stated that even with tax cuts, wage growth will still lag behind inflation. Price increases are not limited to fuel; electricity, healthcare, and food prices are also rising. These are essential expenses with little room for reduction, thus exacerbating financial pressures. Data from the U.S. Bureau of Labor Statistics shows that U.S. inflation rose 3.8% year-on-year in April, the highest since May 2023; meanwhile, average hourly earnings increased by 3.6% year-on-year, officially lagging behind inflation growth.

Cash flow gradually dwindled, forcing people to tighten their belts.

He analyzed that most families still have some cash flow at present, but as tax refunds are gradually depleted, ordinary families have no new sources of income. In the second half of this year, people will inevitably further reduce non-essential spending, and their financial situation will become increasingly strained.

With savings dwindling, borrowing for consumption has become an unavoidable choice for many.

In early May, the financial platform Nader Wallet conducted a survey covering 2,072 American adults. The results showed that 37% of respondents relied on credit cards, pay-later services, or various loans to cover some living expenses this month. Even among middle- and high-income households with an annual income of $100,000 or more, this figure reached 35%, indicating that financial pressure has spread across all income levels.

Retirement funds are being passively used, leading to a continuous accumulation of financial risks for residents.

Data released by Fidelity Investments on Thursday further confirms the current financial pressure on households.

In the first quarter of this year, the number of working professionals using 401(k) retirement savings accounts for loans increased, with the proportion of employees still having outstanding loans rising to 19.2%, up from 18.8% in the same period last year. At the same time, the proportion of people taking out new account loans and withdrawing retirement funds directly due to financial difficulties also increased, indicating that people have begun to use their long-term retirement savings to cope with short-term life challenges.

Summarize

A review of the data clearly shows that high inflation and sluggish income growth are creating dual pressures, leading to a significant decline in the savings capacity of American residents. From everyday borrowing to drawing on retirement assets, household financial leverage continues to rise, accumulating potential risks. If prices remain high and wage growth fails to improve, the financial difficulties of American residents will continue to worsen.