Pessimism about retirement rises amid inflation

A new study shows a decline in Americans’ confidence in their ability to retire comfortably as inflation takes its toll on workers and retirees.

According to the 33rd annual Retirement Confidence Survey, both workers’ and retirees’ confidence about having enough money to live comfortably throughout retirement dropped from 73% in 2022 for those being very or somewhat confident to 64% in 2023 among workers, and from 77% to 73% among retirees. Furthermore, the study revealed that among those who don't feel confident, 4 in 10 workers and a quarter of retirees say it's because they have little to no savings.

The survey of more than 2,500 Americans 25 and older, conducted by the Employee Benefit Research Institute and Greenwald Research, also showed the large impact of inflation on Americans’ outlook, with 29% of workers and 42% of retirees citing rising prices as the reason for their lack of confidence.

“The last time a decline in confidence of this magnitude occurred was in 2008 during the global financial crisis. This shows that the current economic climate, in particular inflation, is eroding the confidence that Americans had in their retirement preparations going into the pandemic,” Craig Copeland, director of wealth benefits research at EBRI, said in a statement.

Nina Lloyd, president and CEO of Opus Financial Advisors, a part of Advisor Group, noted that the biggest worry American workers have had for many years is that they would outlive their money. "With rising inflation, interest rates, and increased longevity, many feel like this fear is more likely to become reality," she said. "It is more important than ever to plan, save and invest for your future.”

The study also showed workers’ debt levels are on the rise and are negatively impacting their ability to save for retirement. Over 6 in 10 workers report their debt is a problem, the study showed, significantly higher than in 2022.

Meanwhile, Americans’ retirement savings have taken a hit, according to the report. Forty percent of workers and 58% of retirees said their retirement account balances have decreased over the past 12 months.

“Workers worry that their salaries won’t keep up with inflation and report more debt, while retirees worry about cost of living and expenses,” Lisa Greenwald, CEO of Greenwald Research, said in the statement. “Half of retirees report that their overall spending is higher than expected, an increase over last year’s one-third, and the share of retirees who feel their retirement lifestyle is worse than they expected is slowly growing.”

Brian Hartmann, partner at Granite Bridge Wealth Management, a part of Advisor Group, noted that bear markets can be discouraging for investors.

“Knowing that, as advisors we need to help our clients prepare for their individual retirements," he said. "That includes bringing awareness to the financial markets that will continue to go both up and down even during their leisure years. They will need investments, advice and income that are built to provide for them throughout the different market cycles that we will certainly experience.”

Finally, while they are worried about the state of their own retirement accounts, Americans’ confidence in Social Security remains mostly unchanged, even as their confidence in Medicare declines. The survey showed half of workers and 7 in 10 retirees feel at least somewhat confident that the benefits provided by Social Security will continue to be at least equal in value to the benefits provided today.

But workers’ confidence in Medicare has notably fallen, with just half saying they feel at least somewhat confident it will continue to provide benefits that are of equal value to today's.