Lingering sentiments about inflation and high costs are derailing financial confidence for some near retirees, finds a new study out today by Fidelity Investments.
According to the firm’s State of Retirement Planning study, 67% of Americans who are in their planning years say they feel confident about retirement—a seven percentage point drop compared to last year.
This could be attributed to increasing day-to-day costs and rising healthcare expenses, Fidelity finds. The research shows that 57% did not plan for high healthcare costs, and 43% say Medicare covers less services and procedures than they initially expected.
Despite their concerns, 72% of recent retirees say their retirement is going as planned and 69% admit it is more enjoyable than they expected it to be.
The general sense of optimism could be due to the fact that today’s retirees continue to have multiple sources of income in retirement, from pensions and private 401(k) accounts to Social Security benefits.
Yet, as pension plans phase out of workforces and Social Security moves towards insolvency, the picture of retirement may not be as bright for future generations. This is especially true for Gen Xers, the oldest of whom are set to retire within the next five to 10 years. Fidelity’s research found that 53% of this age group are confident in their ability to retire on their own terms, and one-third expect to continue working in retirement to supplement their income.
“Notably, the current generation of retirees could be the last to use predictable sources of income such as pensions as the primary way they fund retirement. The shift toward relying on retirement savings heightens the importance of grounding yourself in a financial plan as early as you can,” said Rita Assaf, vice president of Retirement Offerings at Fidelity Investments.
As a result, workers who are in their planning years acknowledge that they’ll need to be more self-reliant with their savings and retirement income. Sixty-one percent of those surveyed believe savings from individual retirement accounts (IRAs), 401(k)s, and other workplace retirement plans will be among their biggest income streams, compared to half of today’s retirees, Fidelity reports.
Their intentions are serious, as recent Fidelity data showed record-high account balances among IRAs, 401(k)s, and 403(b)s.
“The positive savings behaviors we’ve seen many Americans take, particularly over the last few years, sets an important foundation to build a successful retirement plan,” said Assaf. “Many understandably feel overwhelmed, but this shift in retirement income strategy in large part involves a recharting of the planning process. This starts with staying involved and aware of your broader financial picture and leveraging investment strategies to potentially help your money work harder for you.”
Additional insights from Fidelity’s State of Retirement Planning study can be found here.
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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.
