Another study has found current economic events are impacting Americans’ retirement plans—and timing.
The Nationwide Retirement Institute’s eighth annual Advisor Authority survey released today found less than half of investors (47%) plan to retire about the same time as planned and 20% plan to retire later than planned.
More broadly, the study found the current macroeconomic environment has created a stressful situation for investors and advisors, leading to a sharp decrease in their optimism. Just 39% of investors are optimistic about their 12-month financial outlook, a 10-percentage point decrease from last year (49%). Similarly, only 48% of advisors and financial professionals are optimistic, a 15-percentage point decrease from 2021 (63%).
Amidst these macroeconomic factors, advisors and investors have similar, yet contradicting, strategies.
Advisors and financial professionals are counseling clients to contribute more monthly (44%) or the maximum amount (44%) to 401ks or employer sponsored defined contribution plans. They are also managing investments more conservatively (43%). One-third of advisors (33%) are considering purchasing or have purchased an annuity for their clients.
However, investors’ strategies for the next 12 months offer a contrast. A smaller number are contributing more monthly (20%) or the maximum amount (15%) to 401ks or employer sponsored defined contribution plans. They are also less likely to manage investments more conservatively (27%) and are delaying taking Social Security benefits (17%). Only 15% of investors are considering or have purchased an annuity.
“Investors who are anxious can be reactive and make unintentional poor financial decisions,” said Eric Henderson, President of Nationwide Annuity. “Now, more than ever, is the time to leverage the expertise of an advisor to develop a financial plan that leads to security in retirement.”
Henderson added that investors today want to feel confident in their ability to retire, no matter what is happening in the world. “This is where advisors and financial professionals can step in to create a sense of security and confidence in their clients’ long-term plans.”
Volatility, recession fears, inflation and taxes are the top financial concerns contributing to the decline in investor optimism. More than half (54%) of investors expect increased volatility over the next 12 months, but recession fears are 20 points higher (74%) than volatility worries.
This mirrors the level of concern during the height of the COVID-19 pandemic in 2020 when 75% of investors were concerned about a recession. Advisors and financial professionals are even more worried, with 82% concerned about a recession, compared to 77% in 2020.
Investors’ inflation concerns in the next 12 months skyrocketed this year (46% 2022; 29% 2021) as well. Other top financial concerns include taxes (22%) and protecting assets (19%). Investors also most commonly say that inflation is the leading factor contributing to volatility over the next 12 months (40%). Although more than half of investors expect increased market volatility over the next 12 months, these expectations are at a four-year low (54% 2022; 61% 2021; 61% 2020; 66% 2019).
“While it’s surprising that expectations about volatility have dropped among investors, it may indicate that they are coming to grips with the possibility that volatility is the new normal,” said Mark Hackett, Chief of Investment Research. “While investor concerns have lessened, both volatility and inflation are likely to persist in the year ahead. Financial professionals should be talking to clients about implications for their portfolio.”
SEE ALSO:
• No! Economic Anxiety Has Americans Taking Social Security Early
• Inflation Causing Many Older Workers to Postpone Retirement
• Economy Forcing Cutbacks in 401k Contributions: Morgan Stanley
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
