"Our glass is half empty" — why your clients are worried

A recent study conducted by BlackRock, the global money manager with $9.4 trillion in assets, has revealed a concerning trend among participants in U.S. retirement plans. Over the past two years, there has been a significant increase in pessimism regarding their ability to save for retirement. Economic anxiety is on the rise due to factors like high inflation and volatile markets.

According to the report, the number of U.S. retirement savers who feel they are "off track" has more than doubled since 2021, reaching 24%. Conversely, those who feel "on track" have dropped by 13 percentage points from the peak in 2021 to 56%, marking the lowest level since the survey's inception eight years ago.

The impact of economic conditions is pushing nearly 30% of all retirement savers to consider extending their working lives. With last year's poor performance in equity and bond markets, combined with higher interest rates, many individuals are now uncertain about where to invest their savings.

One notable group experiencing a significant shift in confidence is the younger workers, with 31 percent of them expressing they are off track in terms of their retirement plans. This raises concerns that they may lose faith in long-term savings vehicles like the 401(k) and reduce their contributions.

Anne Ackerley, the head of retirement at BlackRock, highlighted that Gen Z is particularly affected, with almost three-quarters of them admitting they don't know how to invest and are looking to their employers for guidance. In an interview with Yahoo Finance, she also revealed that worryingly, "60 percent (of Gen Z) said they would consider selling during a market downturn."  Baby boomers, however seem much more used to market movements, with only 20% saying they would sell into a market downturn.

These findings align with other surveys reflecting the general public's mood. For instance, a recent annual survey by Edelman, a communications group, reported a substantial drop in the percentage of global respondents who expect their families to be better off in the next five years. In the U.S., the figure was even lower at 36%.

However, despite the lack of overall confidence in the government and the media, 78% of respondents in the Edelman survey expressed trust in their employers. This suggests that people are turning to their employers for support during uncertain times.

As a response to the increased market volatility, the BlackRock research indicates a growing interest in retirement products that offer protection against significant market swings. The study shows that 90% of surveyed employees are now interested in allocating at least a portion of their savings to products providing guaranteed income, a notable increase from 76% two years ago.

As a result, 12 large plan sponsors are experimenting with making such options their default choice, potentially benefiting 500,000 participants with $24 billion in combined assets.