In its annual Retirement Confidence Survey of current workers and retirees, the Employee Benefit Research Institute found that workers’ confidence in their ability to fund retirement fell by the largest extent since the financial crisis of 2008, to levels not seen since 2018. Retirees’ confidence also took a substantial hit. Overall, just 20% of respondents felt very confident they will be able to afford a comfortable retirement.
The percentage of workers who felt at least somewhat confident in their ability to afford retirement plummeted nine percentage points, from 73% in 2022 to just 64% in 2023. For retirees, the drop was four percentage points — from 77% in 2022 to 73% in 2023. Although retirees’ confidence remained higher than workers’ — a historical trend — just 27% of retirees were very confident, down from 33% last year and the lowest percentage since 2009.
The top two reasons workers gave for a lack of confidence were having little or no savings/being unprepared/can’t afford it (40% of respondents) and the rising cost of living/inflation (29%). Those reasons mirrored retiree responses, but in reverse order; 42% of retirees who lack confidence were concerned about inflation, while 25% said they had little or no savings, were unprepared, or unable to afford it.
Cost of living a major worry
Inflation was a recurring theme throughout this year’s report.
-
- 84% of workers and 67% of retirees were concerned that inflation will make it harder to save money.
- 73% of workers and 58% of retirees were worried that they will have to cut their spending substantially due to inflation.
- Nearly half of retirees said their overall spending is higher than expected, compared with just 36% in 2022.
- Just 58% of workers (down from 67% in 2022) believed they would have enough money to keep up with the rising cost of living in retirement.
In fact, inflation and the economy were the two most common concerns cited by both groups.
| Concern | Workers | Retirees |
|---|---|---|
| Inflation will stay high for at least the next 12 months | 86% | 79% |
| The U.S. economy will go into a recession in the next 12 months | 80% | 74% |
| The U.S. government making significant changes to the American retirement system | 80% | 71% |
| Interest rates will continue to go up | 80% | 62% |
| Housing costs will rise | 76% | 55% |
| The stock market will be increasingly volatile and unpredictable | 74% | 65% |
| The stock market will be lower in 12 months than it is now | 65% | 58% |
| Another public health emergency or lockdown in the next 12 months | 54% | 53% |
Percentage of workers and retirees who said they were at least somewhat concerned about the event affecting their finances in retirement. The survey was conducted in January and February 2023.
A perspective on income strategies
When asked what they intend to do with their workplace retirement savings plan money when they retire, workers gave the following responses:
| Strategy | Respondents |
|---|---|
| Roll money into an IRA | 36% |
| Keep the money in their workplace retirement savings plan | 30% |
| Cash it out and put the funds into another investment or savings account | 28% |
| Purchase a product that guarantees monthly income for life | 21% |
| Cash it out and spend it | 9% |
| Don't know | 16% |
Younger workers were more likely than older workers to say they would cash out the plan and put the money into another investment or savings account or buy a guaranteed income product. Those with at least $100,000 were more likely than those with less than $10,000 to report that they would roll over the money to an IRA.
More workers seem to be seeking experienced guidance when it comes to managing their retirement strategies; 34% are currently working with a financial professional, up from 29% in 2022, and more than half expect to do so in the future, up from 45% in 2022.
If you have questions or need assistance, contact the Experts at Henssler Financial:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Disclosures: The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
