Nearly Half of US Adults Say American Dream Is Dead as Inflation Tops Financial Security Fear List

People shop for groceries at a supermarket in Glendale, Calif., on Jan. 12, 2022. Robyn Beck/AFP/Getty Images

A new report shows U.S. adults say inflation is the greatest obstacle to reaching financial security in retirement, while 44 percent think Social Security won’t be there when they need it and just 55 percent say the American Dream “is still alive and well.”

These are among the key findings from the 2022 Planning and Progress Study, an annual study released on May 18 by Northwestern Mutual. The report examines Americans’ attitudes and behaviors toward money and financial decision-making, while exploring broader issues around long-term financial security, including the impact of the pandemic and surging prices.

The study shows that Americans have a high degree of confidence in themselves, while expressing skepticism about external factors like the state of the economy or inflation.

While 72 percent said they have had or expect to have a successful career and 66 percent said they have achieved or expect to achieve long-term financial security, only 55 percent believe “the American Dream is still alive and well.”

Just 56 percent think Social Security will be there when they need it, 57 percent say the U.S. economy is showing signs of weakness, while just 35 percent believe inflation will subside in 2022.

The top three biggest obstacles to reaching financial security in retirement were inflation (41 percent), the economy (39 percent), and lack of savings (29 percent).

‘Adaptation Story’

Over 60 percent of American adults said the pandemic has been highly disruptive to how they manage their finances, the study shows. While nearly half of the respondents said they have been able to adapt to the disruption, 13 percent said they have not.

“COVID-19 is by no means behind us, but these findings suggest a meaningful number of people have turned a corner,” Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual, said in a statement.

Calling it an “adaptation story,” Mitchell said one of the responses to the pandemic has been the impulse to save, with 60 percent of American adults saying they’ve managed to build up their savings over the past two years.

“But progress doesn’t always follow a straight line—there’s been a little wobble in people’s behaviors compared to last year,” he said, noting that there’s been a 15 percent drop in the average amount of personal savings between 2021 and 2022.

“There could be several factors contributing to the drop in savings from last year ranging from spiking inflation to people spending more as they resume some sense of normalcy in their lives,” Mitchell explained.

The United States is facing down the highest rate of inflation in 40 years, with an impact on corporate profits and consumer sentiment.

Gasoline prices hover around $4.00 a gallon for the least expensive grade at several gas stations in the nation's capital in Washington on April 11, 2022. Chip Somodevilla/Getty Images

Grocery shopping in Rosemead, Calif., on April 21, 2022. Frederic J. Brown/AFP via Getty Images

A flurry of major retailers missed Wall Street expectations by wide margins last week, while the vast majority of the nearly 150 U.S. retailers that have reported first-quarter earnings so far have explicitly singled out inflation as an issue they’re wrestling with.

Consumer confidence, which serves as a barometer of consumer spending trends, fell in May to its lowest level since 2013, according to the latest data from the University of Michigan’s survey of consumer sentiment.

Joanne Hsu, survey director, said inflation was at the forefront of consumers’ thoughts, with respondents mentioning it throughout the survey.

“Consumers’ assessment of their current financial situation relative to a year ago is at its lowest reading since 2013, with 36 percent of consumers attributing their negative assessment to inflation,” Hsu said. “Buying conditions for durables reached its lowest reading since the question began appearing on the monthly surveys in 1978, again primarily due to high prices.”

The decline in consumer confidence, along with other metrics, has fueled concerns that the U.S. economy could be headed for a recession, as the Federal Reserve embarks on a path of rate hikes that will tighten financial conditions.

Recession ‘Not Inevitable’

Recession talk has become more widespread among analysts, with a growing chorus of experts and executives signaling the potential for a downturn.

Wells Fargo head Charlie Scharf said there was “no question” that the economy would see a downturn in the near future, while former Goldman Sachs CEO Lloyd Blankfein has described a “very, very high” risk of a recession.

Still, Goldman Sachs economists think the chances that the U.S. economy will dip into a recession in the next two years are low. But the investment bank’s equity team has nevertheless released a recession manual for its clients to help them prepare for a possible downturn.

“A recession is not inevitable, but clients constantly ask what to expect from equities in the event of a recession,” chief U.S. equity strategist David Kostin wrote in a note to clients on May 19. “Our economists estimate a 35 percent probability that the U.S. economy will enter a recession during the next two years and believe the yield curve is pricing a similar likelihood of a contraction.”

Kostin said that recent stock market turbulence suggests traders are increasingly pricing in growing odds of a downturn, while adding that this doesn’t reflect “the strength of recent economic data.”

Speaking at an investor day on May 23, JPMorgan Chase CEO Jamie Dimon took stock of troubles facing the U.S. economy.

Dimon described a “strong economy” with “big storm clouds,” suggesting greater economic uncertainty in the near future.

“I’m calling it storm clouds because they’re storm clouds. They may dissipate,” Dimon told investors.

Earlier this month, Dimon assessed the possible impact of the Federal Reserve’s regimen of rate hikes, saying there was a “one-in-three chance” that the Fed could manage a “soft landing,” meaning keeping monetary policy loose enough to avoid a recession.

At the same time, Dimon assigned equal probability for two less favorable outcomes, saying that there was a one-third chance of a “mild recession” and that there was also “a chance it’s going to be much harder than that.”

In a new report, leading economists said the world is facing a complex combination of challenges, including high inflation and greater food insecurity that could lead to social unrest in developing countries.

According to the World Economic Forum’s Chief Economists Outlook report, inflation is expected to remain high through 2022, supply chain disruption is expected to mount owing to localization and politicization, and the world is on track for the worst food crisis in recent history.

Andrew Moran and Nicholas Dolinger contributed to this report.