Advisors face a new reality as investors pull back on risk as costs bite

American investors are growing markedly more cautious, reshaping how they think about risk, retirement and financial security.

Affordability pressures and economic uncertainty are pushing households toward lower risk tolerance and new financial behaviors with more than three quarters of respondents to a survey by F&G Annuities & Life saying that the past year’s events have made them more financially cautious, a four-point increase from last year.

The findings of the firm’s sixth annual Risk Tolerance Tracker suggest that persistent cost-of-living strain is no longer a temporary hurdle but a structural factor influencing long-term planning decisions.

“Affordability pressures are no longer a short-term challenge; they can have lasting effects on how Americans prepare for retirement,” said Chris Blunt, Chief Executive Officer of F&G. “As households manage higher everyday living costs, many are feeling more financially stressed at a time when long-term security and planning should be a priority. Our sixth annual survey underscores how many Americans are recalibrating risk and rethinking their plans, as well as the importance of taking meaningful steps to build a more confident financial future.”

Midlife investors feel the most pressure

Risk aversion is especially pronounced among those in their 40s, a demographic balancing mortgages, family responsibilities and retirement preparation. In this group, 81% report becoming more conservative with financial risk, the highest level across generations.

Retirement income anxiety is widespread overall, with 66% of respondents concerned about their future income due to recent economic conditions. Skepticism around Social Security also remains elevated and nearly one third of Americans doubt the program will be available when they retire. Among those in their 40s, that concern rises to 40%.

Gen X investors more broadly show heightened unease, with 46% questioning Social Security’s future, compared with just 20% of Baby Boomers. The generational divide highlights an urgent planning opportunity for advisors working with pre-retirees.

Healthcare costs climb the worry list

Inflation remains the top financial concern, cited by 48% of respondents, though it eased modestly from last year. Healthcare and long-term care costs, however, jumped sharply into the second highest concern at 31%, rising eight percentage points year over year.

Other stressors weighing on financial confidence include higher taxes (25%), energy prices (24%), fears of recession (23%), Social Security uncertainty (22%) and housing affordability (21%). The breadth of concerns underscores why many clients are reassessing both protection strategies and income planning.

More than half of Americans (56%) worry that artificial intelligence could negatively affect their finances, while 49% express concern about a tightening job market. Both categories posted the largest year-over-year increases in the survey, signaling growing unease about income stability and the future of work. Meanwhile, 70% remain worried about the possibility of a US recession.

Advice gap persists despite rising uncertainty

Even as stress levels rise, a majority of Americans (54%) still do not work with a financial professional.

Behavioral shifts suggest investors are increasingly open to new solutions. Almost half (48%) say they are more willing to explore new financial products, with Gen X showing particularly strong interest at 53%. Many respondents report taking proactive steps such as increasing savings, revising retirement timelines, supplementing income or implementing stricter budgets.

Millennials are leading the charge with 73% having adjusted their investment approach in the last three to six months to become more cautious or recession-resistant. Gen X follows at 55%, while only 37% of Boomers report similar changes.

Retirees appear more passive, with just 34% making adjustments — an area where ongoing advisory engagement could prove critical. Those already working with an advisor were far more likely to take action (67%) compared with those without professional guidance (39%).

“As our survey has demonstrated over the years, in environments defined by economic uncertainty, the need for a comprehensive plan backed by a financial professional has never been more important,” said Ron Barrett, Chief Distribution Officer of F&G. “Whether investors are in the earlier stages of planning or approaching retirement, a trusted advisor can help investors cut through the noise and realistically assess risk. They can also guide an ongoing retirement strategy that balances protection, growth and guaranteed income, so investors can move forward with greater confidence amid volatile times.”