Pre-retirees are delaying their retirement plans in response to rising inflation, high interest rates, and unstable economic environments.
That’s according to Nationwide’s eight annual Advisor Authority survey, which found that 25% of pre-retirees—defined as non-retired investors between the ages of 55 to 65—are postponing their retirement, and another 15% are debating whether they ever will retire.
The majority of near retirees attribute this decision to inflation, who 60% believe will pose a significant challenge to their retirement portfolio over the next 12 months. Others credited an economic recession (46%), market volatility (36%), and taxes (23%) as threats to their retirement.
“With economic stressors continuing to weigh on the minds of investors, working with an advisor has never been more important to achieving security in retirement,” said Eric Henderson, president of Nationwide Annuity, in a statement. “Because the trajectory of the markets and the economy looks uncertain in the short term, an advisor can help investors who are nearing retirement age remain calm, nimble and informed when it comes to adjusting their plans.”
Questions on Social Security’s viability
Adding to their concerns, 53% of pre-retirees are questioning the long-term practicality of Social Security, and whether the benefits will be available to them during retirement. Twenty-six percent of pre-retiree investors say Social Security will exhaust funds in their lifetime, and 26% believe the benefits will run out after they’ve entered retirement.
Nationwide notes the validity with investor fears. Questions surrounding Social Security’s viability and concerns of benefit cuts have been rising topics in the retirement and advisory industry in the past decades, and especially so in recent years. According to the 2023 Old Age, Survivors, and Disability Insurance Program’s Trustees report, 23% of scheduled benefit payments for recipients could be depleted by 2023.
Despite these concerns, Nationwide said the majority of pre-retirees who say they have strategies to protect against outliving their savings are primarily relying on Social Security (52%). Close to half have added lifetime income solutions to their portfolio, with 46% of those who have a strategy in place incorporating annuities into their retirement plans to guarantee income and protect against outliving their savings.
Other have changed their approach to retirement planning, said Nationwide, with 30% who are managing their investments more conservatively over the next 12 months, and 19% who are planning to contribute to their 401(k) or employer-sponsored defined contribution (DC) plan each month. Just 10% are planning to manage their investments more aggressively.
More investors seek financial advice
As investors worry over an economic recession, more are turning to financial advisors for assistance. Of the 49% of pre-retirees who currently work with an advisor or financial professional, 40% began working with one over the past 12 months, found Nationwide.
According to the research, 30% of pre-retirees working with an advisor do so to feel more confident in their financial future, and 88% of pre-retiree investors say having a plan for their retirement helps them feel in control of their financial future.
To help their clients feel confident for their retirement, 48% of advisors are helping their pre-retiree clients prepare for near-term retirement by adopting strategies to protect their clients’ assets against market risk and 42% are ensuring their pre-retiree clients have enough liquidity to cover expenses for two years in the event of a financial crisis, reported the research.
Nationwide found that when searching for advisors, pre-retirees are likely to consider the following: years of experience (37%); recent or current market conditions (17%); personalized advice for a holistic financial picture (16%); and the prospect of an economic recession (16%).
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
