Heading into yet another year of above-average inflation figures, more Americans are now beginning to change how they’re saving and investing for retirement.
The 2023 Global Retirement Survey released today by MFS Investment Management, which surveyed more than 1,000 defined contribution (DC) participants in the U.S. and an additional 3,000 globally, found that 60% of workers believe the rise in inflation has caused them to think differently about their retirement.
Moreover, 75% say they now need to save more for retirement than they originally thought; 66% lack the confidence to retire at the age they want; and 32% think they will not be able to retire at all.
Another 63% of workers believe their retirement will not mean an end to their employment but rather a transition to reduced hours or a different job, while 61% of Americans have adopted more conservative investment strategies, according to MFS.
Other financial priorities, including affording day-to-day costs and paying down debt, are in higher competition with retirement savings now, respondents say. This was especially true for Millennial workers (89%), who, along with retirement, are saving for emergencies (41%), education (28%), student loan payments (25%), all while living paycheck to paycheck (26%).
“The uncertainties and disruptions over the past few years have clearly affected workplace savers, who are now less sure about when retirement will come, what it will look like and how they should prepare for it,” says Jeri Savage, a retirement lead strategist at MFS.
Savage notes that communication strategies, especially among younger workers who have decades before retirement, can be effective in growing savings. “Plan sponsors and advisors have an opportunity to educate workers on the benefits of staying invested, as well as how to get back on track and stay on track,” Savage said.
Access to different advice strategies
MFS research reports that more investors are looking to their employer to provide retirement planning advice as part of its benefits package. Fifty-three percent of respondents say they have found or expect to find a financial advisor through their employer, and 70% say they would work with an advisor if it was offered through their workplace retirement plan.
How participants want to receive that advice varies, MFS research shows. Forty-five percent of workers want advice in person or through video, 20% utilize online tools, and 9% defer to robo-advisors.
Different generations have specific preferences in receiving advice, as well. For example, Generation X investors are more likely to turn to an advisor while Millennials tend to look to online investment services or their employers.
Clarity towards TDFs
Advisors should also emphasize education towards investments and investing strategies, finds MFS. While 56% of participants are currently invested in a target-date fund (TDF), just a third of those under 45 and only 19% of older workers own a single TDF, while others incorrectly believe TDFs will provide a guaranteed stream of income or a guaranteed rate of return in retirement.
“Our survey highlights that more education is needed to ensure that retirement investors understand the important role that TDFs can play in retirement strategies,” Savage adds. “That education can help increase participation in TDFs, especially by those who may not yet understand their benefits.”
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