Declining Retirement Confidence: What Can You Do to Gain Back Some Confidence?

According to a recent publication by SHRM, there were several recent employee surveys conducted which show that retirement confidence is down, with fewer workplace savers seeing themselves on track to retire when they had originally planned. 

In fact, workers' outlooks on retiring have seen a reversal from the last few years where confidence remained steady and even increased. 

Most workplace savers now say they're unsure about the economic outlook, given an inflation rate that rose 9.1 percent year over year in June. Adding to their uncertainty was a steep decline in stock market values this year, with the benchmark S&P 500 index plummeting nearly 20 percent from January through May before improving a bit to notch right at 18 percent in 2022 as of the end of July.

Declining Retirement Confidence

Overall, 63 percent of savers feel they are on track for retirement, down from 68 percent a year ago, according to BlackRock's seventh annual Read on Retirement survey, conducted between March 25-April 30, 2022. 

Inflation is the main driver for the decline in confidence among more than 1,308 respondents who participate in their employer's 401(k) or 403(b) plans, with 87 percent of workplace savers reporting that they're concerned about inflation affecting their retirement. 

It was also found in this survey, that older workers may have a more realistic view of retirement expectations. Nearly half of Baby Boomers said they'll need to save between $1 million and $3 million for a comfortable retirement, at least four times the amount that those from Generation Z anticipate needing.

Delayed Retirements

Meanwhile, almost half of those who planned to retire in 2022 are reconsidering or have put that plan on hold, according to a June survey of 1,000 U.S. consumers by software-maker Quicken Inc.  And, workers ages 58 to 74 who were not planning on retiring in 2022 are now considering delaying retirement even further. 

Among those who are considering delaying retirement, or "unretiring" and returning to the labor force, the changing economic climate is top of mind. Respondents cited the following factors as reasons they will need to continue working:

1. Inflation pushing up costs (cited by 65 percent).
​2. The decline in the stock market (45 percent).
3. Increased interest rates (30 percent).

Even before this year's economic challenges, however, retirement ages had been rising. In 2021, the average retirement age for men in the U.S. was 64.7, roughly three years later than in the mid-1980s and early 1990s, according to a July report by the Center for Retirement Research at Boston College. The retirement age for women in 2021 rose to 62.1, up dramatically from 55 in the 1960s. 

Major drivers for delaying retirement in recent decades, the researchers noted, include the shift from guaranteed defined benefit pensions to defined contribution 401(k)s and the decline of retiree health insurance, as well as extended life spans and the desire to remain active and engaged.

Protecting Your Retirement Savings

At Summerlin Benefits Consulting we know that today’s more mature employees want help with saving for retirement and it’s important that employers provide resources and tools to help these employees make informed decisions about their long-term savings.   
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For example, employees in their mid to late 50’s should be allowed to do an In Service Transfer from their 401k to a safe external environment, like a Fixed Index Annuity. This will allow the employee to protect the savings they have built over the years, so that they won’t experience the impact of major losses right before reaching retirement age, which could cause them to have to work longer than anticipated. 
 
More mature investors, even when still employed, should shift their retirement savings focus to Safety 1st. Protecting the money you already have and getting a reasonable rate of return over time without any more losses will help you be better prepared by the time you do retire.