7 things the middle class won’t be able to afford in the next 5 years

 

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Say that you are making great progress financially. You’ve adopted a middle-class lifestyle and are enjoying all the comforts that come with it: a nice home, financial stability, a growing nest egg.

But inflation has overtaken us all; And, according to experts, there are some things you won’t be able to afford in the next five years.

“I’ve noticed how the middle class currently enjoys some of the more important aspects of life,” said Alyssa Huff, real estate expert and owner of Sale House As Is. “Such as owning homes with manageable mortgages, sending their kids to college with the help of student loans, health care coverage, saving for retirement, and even indulging in the occasional luxury.”

But looking ahead, he said he is worried about the future: “Rising housing costs, tuition fees, health care expenses and inflation could make life harder for middle-class families over the next five years.”

Huff said it can be difficult to afford a home, send children to college or save for retirement. Even simple joys like vacations or buying nice things can become more challenging.

Good News? Knowing these rising costs can help you better prepare.

“As someone who cares deeply about financial well-being,” Huff said, “I urge the middle class to weather these potential storms and keep their dreams within reach right now.” “Start planning wisely.”

Here are some costs that will continue to rise and you should keep an eye on.

extended family trips

David Kemmerer, CEO of CoinLedger, said, “I would say that the tradition of extended family trips, especially overseas, will likely become something that the middle class cannot afford in the coming years.” “In many ways I already feel like traditional family vacations have fallen by the wayside over the last decade due to a number of factors — some of them being COVID and inflation.”

But since middle-class incomes aren’t growing as much as they used to, he said money that previously could have been spent on trips will probably be spent on housing and other needs.

 

new cars

Melanie Musson, finance expert at Clearsurance, said the middle class will not be able to buy a new car in the near future.

“Vehicle prices have increased dramatically over the past four years and are likely to become more expensive going forward,” Musson said. “Safety features, autonomous technology and EV batteries contribute to rising prices.”

private school tuition

According to Jake Hill, CEO of Datahammer, if inflation and high demand continue on their current trajectory, the middle class will not be able to afford private school tuition in the next five years.

“Tuition rates have been rising steadily for years,” he said, “and it is very likely that they will overtake middle-class income in the near future.”

He said this is especially true when you look at the full picture of a middle-class family’s expenses, which also includes the rising cost of housing.

Homeownership and Real Estate

“Honestly, the way things are going, getting a mortgage or buying a home may be something the middle class won’t be able to afford in five years,” said Carter Seuthe, CEO of Credit Summit.

Especially in some high-demand areas of the country, he said, it’s still very difficult to get an offer accepted on a home unless you’re bidding well above the asking price, waiving the inspection and key elements of the sale. Not offering, not offering in cash. etc.

“I can definitely see home ownership becoming out of reach for your average middle-class citizen,” he said.

When it comes to owning property, one area to look closely at is real estate, according to David Brillant, a tax, trust and estate attorney with the Brillant Law Firm in California.

“With recent adjustments to estate 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 ownership and transfer of ownership will be more difficult for the middle class.” Real estate will become increasingly challenging.

“My work with clients on these tax changes has underlined how significant the financial burden can be, particularly with the proposed cuts to the Integrated Credit, making substantial gifts now more attractive in the near future.”

health care costs

According to experts, other important areas to watch are long-term care and health care costs.

“These expenses have been steadily increasing, exceeding the general inflation rate for years, and there is no sign of this trend being reversed,” said Mike Kozonen, financial advisor and owner of Principal Preservation Services.

He said many middle-class families may find themselves unprepared for the financial stress of long-term care, whether for themselves or aging parents.

“My work with clients has underlined the importance of integrating healthcare planning into a comprehensive retirement strategy,” he said. “Without proper planning, affordability of needed long-term care services can become a significant challenge, potentially depleting retirement savings prematurely.”

Vacation and travel in retirement

For those who want to retire in the next five years, vacation and travel in retirement is another aspect to consider, Kozonen said.

“For many people, the desire to explore and enjoy leisure activities forms a central part of their retirement dreams.”

However, with rising costs and inflationary pressures affecting everything from airfares to housing and food, he said what was once considered an attainable goal for the middle class may soon become a luxury.

“This change may require adjustments to retirement planning, emphasizing the need to create a more robust savings strategy to accommodate the higher costs of vacation and travel.”

‘Safe’ investments for retirees

According to Kozonen, the concept of a “safe” investment may also be changing.

“Traditionally,” he said, “bonds and fixed income have been viewed as the cornerstone of a retiree’s portfolio, providing both income and stability.”

However, with interest rates at historic lows and inflation rising, he said the real returns on these investments may not keep pace with inflation.

“This reality poses a risk to the preservation of purchasing power for many middle-class retirees,” he explained. “In advising clients, it has become important to explore diversified investment strategies that can provide both growth and protection against inflation, while ensuring that their retirement savings can support their lifestyle and goals.”

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