State of America’s Finances: The 2025 Year-End Recap

Economic data is supposed to show us how we’re doing. Instead, heading into the final weeks of 2025, it feels more like a split-screen: record market highs and solid savings habits on one side, and households running on fumes on the other. If you ask the averages, America looks fine. If you ask Americans, the picture is messier.

The truth lies somewhere in the middle — and it’s more conflicted than any single metric can capture.

The “good” side of the split screen: markets, savings, and long-term planning

Let’s start with the headline-friendly stuff: Americans made real financial progress in 2025, even if it didn’t always feel like it.

Retirement account balances hit record levels. The average 401(k) climbed to about $144,400, and IRAs rose to roughly $138,000, thanks in part to a market where the S&P 500 is up double digits and the Nasdaq even more. Despite a choppy year, contribution rates held steady around 14% of pay, just shy of the recommended 15%.

People also made some smart moves outside of retirement accounts. This year:

• 37% built emergency savings
  
  
• 36% contributed to retirement savings
  
  
• 34% invested in the stock market
  
  
• 32% paid down debt
  
  
• 31% followed a budget

A surprising number of households stayed focused on long-term goals — a huge win considering the macro backdrop.

And December brings its own burst of financial productivity. Nearly 1 in 5 Americans say the choices they make this month set the tone for the year ahead. People are reviewing credit scores, rebalancing investments, adjusting withholdings, and finishing year-end tax planning. At work, 37% are exploring new job opportunities, a third are updating their résumés, and more than a quarter are preparing to ask for a raise.

From a pure “financial health behaviors” standpoint, the U.S. is not asleep at the wheel.

The “hard” side of the split screen: higher prices, weaker income growth, and middle-class fatigue

But the lived experience of 2025 tells a different story. More than half of Americans (54%) say their cost of living rose this year. For many, December is the breaking point: 31% feel more financial stress now than in any other month, and 25% say holiday spending makes it harder to stay on track.

Over one-fifth had to dip into savings to cover basic expenses. And the middle class — typically the economy’s stabilizer — is strained. Prices for goods and services are roughly 25% higher than in 2020, and categories like groceries, coffee, car repairs, and everyday essentials saw another leg up this year.

Real income growth isn’t keeping up. JPMorgan Chase data shows:

• Real median income growth ~ 1.6%
  
  
• Young adults (25–29): 5.2% income growth (down from 9.7% in 2019)
  
  
• Workers 50–54: negative real wage growth
  
  
• Bank balances are flat, not rising

After a brief pandemic-era bump, wage momentum has cooled dramatically while prices have settled at a permanently higher plateau. It feels like running in place — and people know it.

The sentiment data reflects that fatigue: nearly half of Americans tried to cut back on spending this year, a third worried about paying their bills, and more than a fifth had to pull from savings just to get by. Among paycheck-to-paycheck households, lower-income Millennials and Gen X are under the most pressure, even as growth has slowed nationally.

December as a financial checkpoint

One of the clearest patterns in the year-end data is that December has become more than a holiday month — it’s a money month.

In December specifically:

• 35% say the season makes them more aware of their financial situation
  
  
• 29% say hidden holiday costs are more stressful than buying gifts
  
  
• 22% feel pressure to appear more financially successful
  
  
• 23% feel more organized after reviewing accounts
  
  
• 21% say December habits set the tone for 2026

It’s reflection, recalibration, and stress — all at once.

And if you hand Americans a hypothetical $10,000 windfall, the priorities are crystal clear:

• 53% would build an emergency fund
  
  
• 42% would pay down credit card debt
  
  
• 41% would invest it
  
  
• Only 36% would spend it on holiday costs

People want stability. They just feel further away from it than they used to.

So how are Americans really doing?

The answer depends on which screen you’re looking at.

The “macro” screen says: Markets are strong, savings habits held up, retirement balances are at all-time highs, and many households made smart moves this year.

But the “lived experience” screen says: Costs are still too high, income growth is too slow, the middle class is stretched thin, and December is equal parts financial audit and emotional gauntlet.

Both are true. And that tension is the defining feature of the 2025 economy.

For now, households are doing what they’ve done all year — planning, saving, adjusting, and hoping the new year finally brings something they haven’t felt in a while: breathing room.