A survey of over 2,000 investors finds that more than half (61%) hold different expectations for their retirement compared to five years ago.
The latest findings from Nationwide’s Advisor Authority survey, powered by the Nationwide Retirement Institute, shows that nearly half of respondents say their retirement dreams have been delayed, altered, or canceled because of changing markets in the last years.
Moreover, the rising “magic number” of needing $1.46 million to retire has left some feeling hopeless about affording their later years. According to the findings, 42% of respondents measure needing between $1 million and $2 million to retire, and 18% seek over $2 million to retire comfortably.
This anxiety in achieving the perfect retirement figure has led some to doubt a future where they can retire. Nationwide found that investors over the age of 55 or currently in retirement are most worried about paying for basic living expenses (83%), medication and other health-related items (58%), and supplemental health insurance (39%) in their future.
However, Nationwide notes that “magic numbers” are only figures that look different to everyone—in reality, participants should base their ideal savings on day-to-day costs, life needs, etc. Incorporating a financial plan with a trusted advisor can also help participants understand how to break down their savings year-over-year so they have enough to last through retirement, Nationwide adds.
“What’s important to remember is that everyone’s ‘magic number’ in retirement will vary depending on a number of variables including spending habits, health, debt levels, location and more,” said Rona Guymon, senior vice president of Nationwide Annuity Distribution.
“It’s good to have a goal in mind, but holistic financial planning with an advisor is more likely to lead to a comfortable retirement,” Guymon continued. “At the end of the day, a magic number doesn’t tell you much about how long your income will last over an uncertain amount of time in retirement. That’s where holistic financial planning can make all the difference in the world to address the anxiety of a nervous investor.”
A ‘difficult reality’
As investors worry over hitting their retirement targets, Nationwide says others are weighing a difficult reality as they realize the cost to retire. Twenty-seven percent of non-retired investors say they would likely be forced to return to the workforce at some point due to inadequate savings if they retired within the next 12 months, while 19% are unsure if they’ll ever be able to retire. An additional 19% point to inflation for the hold-up, adding that they will retire later than planned due to market uncertainty.
Reports have previously warned consumers of an impending recession in 2024. However, recent estimates show it’s unlikely the market will swing into a downturn this year. Still, Nationwide research shows the data isn’t reaching investors, as three in four continue to worry about an economic recession in 2024.
As a result, 31% of non-retired investors believe a downturn will pose the most immediate challenge to their retirement portfolio over the next 12 months, and 53% expect interest rates to increase 12 months from now.
The concerns are influencing some clients to rethink their retirement planning strategies, say 48% of advisors in the Nationwide study.
To help their clients protect assets against market risk, advisors are using annuities (79%), diversification and non-correlated assets (77%) and liquid alternatives, such as mutual bonds or ETFs (58%).
Other financial professionals see their clients taking non-traditional approaches to their retirement, including withdrawing more funds from their retirement accounts to meet financial commitments (34%), liquidating assets (24%), and even moving in with adult children (16%).
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