Say you’re riding high — financially speaking. You’ve acquired a middle class lifestyle and are enjoying all the perks that come with it: a nicer home, financial stability, a growing nest egg.
But inflation creeps up on us all, and according to experts, there are things you won’t be able to afford anymore in the next five years.
“I’ve seen how the middle class currently enjoys some important aspects of life,” said Alyssa Huff, real estate expert and owner of Sell House As Is. “Like owning homes with manageable mortgages, sending their kids to college with the help of student loans, having healthcare coverage, saving for retirement, and even indulging in occasional luxuries.”
But looking ahead, she said she’s concerned about the future. “Rising housing costs, tuition fees, healthcare expenses, and inflation could make life tougher for middle-class families in the next five years.”
The good news? Knowing 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 and that you should keep an eye on.
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“I would say the tradition of extended family trips, especially overseas, will probably increasingly be something the middle class can’t afford in the coming years,” said David Kemmerer, CEO of CoinLedger. “In lots of ways I already feel like the traditional family vacation has fallen to the wayside over the last decade due to a number of factors — Covid and inflation being some of them.”
But with the middle class income not going nearly as far as it used to, he said money that could previously have been devoted to trips probably will be going to things like housing and other necessities.
Melanie Musson, finance expert with Clearsurance, said the middle class won’t be able to afford a new car in the not-so-distant future.
“Vehicle prices have increased dramatically in the past four years and will likely continue to become more expensive,” Musson said. “Safety features, autonomous technology and EV batteries contribute to the rising prices.”
According to Jake Hill, CEO of DebtHammer, if inflation and high demand continue on their current trajectory, the middle class won’t be able to afford private school tuition in the next five years.
“Tuition rates have been steadily climbing for years,” he said, “and it’s highly likely they’ll outpace a middle-class income in the near future.”
He said this is especially true when you look at the whole picture of a middle-class family’s expenses, including ever-rising housing costs.
“Honestly, with the way things are going, a mortgage or house purchase might 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’s still pretty difficult to have an offer accepted on a home unless you’re bidding far over the asking price, waiving key elements of the inspection and sale, offering in cash, etc.
He said, “I can certainly see owning a home becoming something that’s more and more out of reach for your average middle-class citizen.”
Speaking of owning properties, according to David Brillant, a tax, trust and estate lawyer at Brillant Law Firm in California, one area to watch closely is real estate.
“With the recent adjustments in property tax laws, such as those prompted by Proposition 19 [in California], and the potential changes to the unified credit against estate and gift taxes,” he said, “there’s a real concern that owning and passing down real property will become increasingly challenging for the middle class.
“My work with clients on navigating these tax changes has underscored how significant the financial burden can be, especially with the proposed reduction in the unified credit, making substantial gifts now more attractive in the near future.”
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’s no sign of this trend reversing,” said Mike Kojonen, financial advisor and owner of Principal Preservation Services.
He said many middle-class families may find themselves unprepared for the financial strain 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, the affordability of necessary long-term care services could become a significant challenge, potentially depleting retirement savings prematurely.”
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 leisurely pursuits forms a central part of their retirement dream.”
However, with rising costs and inflationary pressures affecting everything from airfare to accommodations and dining, he said what was once considered an attainable goal for the middle class may soon become a luxury.
“This shift could lead to necessary adjustments in retirement planning, emphasizing the need to build a more robust savings strategy to accommodate higher costs of leisure and travel.”
According to Kojonen, the concept of “safe” investments also might change.
“Traditionally,” he said, “bonds and fixed income have been seen as cornerstones of a retiree’s portfolio, providing both income and stability.”
However, with interest rates at historic lows and inflation on the rise, he said the real returns of 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’s become increasingly important to explore diversified investment strategies that can offer both growth and protection against inflation, ensuring their retirement savings can support their lifestyle and goals.”
