Data and Research September 28, 2022

Workers Delaying Retirement Has Doubled Since Last Year

For employers, the recent upward trend in delayed retirement is causing complications, according to a new report from Nationwide Retirement Institute.  

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Workers are delaying retirement because of inflation, which is affecting employers’ ability to hire new workers and promote personnel, according to a new report from Nationwide Retirement Institute.

The 2022 Nationwide In-Plan Lifetime Income Survey found that 40% of workers age 45 and older are delaying their retirement because of rising living costs—double those who said they delayed retirement last year because of the COVID-19 pandemic.

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“We’re watching delayed retirements impact employers’ entire talent lifecycle, and it may be unintentionally contributing to ‘quiet quitting,’” Amelia Dunlap, vice president of Nationwide Retirement Solutions marketing, said in a press release.

Nationwide Institute data show that 36% of private-sector employers say workers’ delayed retirements have affected their ability to hire new talent. In addition, 34% said delayed retirements have affected promoting young workers and 35% said they have made their health benefits plans more expensive. Nationwide also found that employers are reporting effects to the well-being of their employees because of delayed retirements.

Data show that among employers, 30% reported lower team morale, 29% reported negative effects on employees’ mental health, 27% have noticed lower workforce productivity and 22% reported negative effects on the physical health of employees.

“Employers may find themselves with a workforce that lacks motivation to go above and beyond without the ability to reward employees for a job well done,” Dunlap added. “Employers should look for opportunities to better support their older workforce as they near retirement.”

The study also found that 24% of all workers feel they are on the wrong track for retirement, an increase of 10 percentage points compared to 2021, while 58% of workers have a positive outlook on their retirement plan and financial investments, compared with 72% one year ago.

Additionally, the Nationwide Retirement Institute found that 66% of employees cited inflation as a top retirement concern, versus 53% in 2021.  

An analysis across the public and private sectors shows that government employees are more optimistic than private-sector employees are about their retirement security: 28% of government employees are expecting to delay their retirement because of inflation, compared with 41% of private-sector workers, according to Nationwide data.

Accordingly, 75% of government workers said they are on the right track with regard to preparing financially for retirement, versus 56% of private-sector employees.

“Employers must invest now in solutions and benefits that help their employees enhance their financial security and give them greater confidence that they can retire ‘on time,’” Dunlap said. “The private sector has an opportunity to invest in solutions that are already enjoyed by the public sector, such as in-plan guaranteed lifetime income solutions. Like pensions, they offer a steady stream of predictable income for life.”

The Nationwide report does show growing interest from workers in lifetime income investment options.

According to the data, 53% of all employees age 45 and older are interested in guaranteed lifetime income investment options included as part of a target-date fund, compared with 42% in 2021; 48% reported they are interested in contributing to such investment options as part of a managed account; and 41% would likely roll over retirement savings into a guaranteed lifetime income investment option if they had the option—a six-point increase from last year.

“Our research shows that employers and employees alike are starting to realize that guaranteed lifetime income offers unique confidence that workers are protected against inflation and market volatility and that individuals won’t outlive their savings,” Dunlap said. “Employers should work with their retirement plan adviser or consultant to help find the right investment solutions to set up their workforce for long-term financial success and the growth of the next generation of talent.”

The report was conducted by Edelman Data and Intelligence in an online survey on behalf of Nationwide from July 14 to August 5. The respondents included 500 corporate plan sponsors, 100 public-sector plan sponsors, 1,000 plan participants age 45 and above with access to a 401(k), 403(b), 457(b) or other tax-preferred defined contribution plan at work and 100 plan participants age 35 to 44 with access to a 401(k), 403(b), 457(b) or other preferred defined contribution plan at work.

Data and Research September 28, 2022

Nearly Half of Participants Are Saving Less Than 10% of Income for Retirement

A new report says recession fears are likely driving interest in lifetime income options for workers.

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Workers are anxious about the effects of a potential recession on their retirement planning, which may be driving greater interest in retirement income options, according to new research.

The Protected Retirement Income and Planning Report, produced by the Alliance for Lifetime Income and CANNEX, says 48% of workers believe their retirement savings and other sources of income will last throughout their lifetime, compared with 55% in 2021. Among workers who have an annuity, 74% believe their savings and income sources will last their lifetime, compared with 43% for those without one, the study found.

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“Consumers’ strong desire for protection amid this tricky economic environment is why the alliance is relentless in helping people understand how to protect their hard-earned savings,” Jean Statler, CEO of the Alliance for Lifetime Income, said in a press release. “Not surprisingly, consumers are turning up the heat on their financial professionals and asking them to find ways to protect their portfolios.”

The report shows that overall, 63% of workers worry about their finances several times a month or more often, as 25% worry several times per month, 24% worry every day and 14% fret about finances several times a week.   

Among respondents, 70% said they will be able to fund basic needs in retirement, 23% hope to be able to fund the basics and 3% said “there is not a chance,” the study found. When workers were asked if they would be able to fund “wants” in retirement, 35% said they will be able fund them, while 49% hope to and 11% said “no chance.” For funding “a few splurges” in retirement, 30% said they will be able to fund some luxuries, 48% hope to, 16% said “no chance” and 7% were not sure.

Many workers may not be able to fund the lifestyle they imagine in retirement if their current savings patterns persist, the report says. Data show that 45% of nonretired workers age 45 to 75 are saving less than 10% of their annual income for retirement; more specifically, 27% are saving below 5% and 18% are saving from 5% to less than 10%.

The study also found that 17% of workers are saving 10% to less than 15%; 11% are saving 15% to less than 20%; and 12% are saving 20% to less than 25%.

The report also shows—consistent with data from an earlier iteration of the CANNEX and ALI Protected Retirement Income and Planning Report, which was published earlier this year—that investors place more emphasis on retirement income protection than financial professionals. Whereas 89% of consumers rated income protection as important in the context of retirement planning, 73% of financial professionals said the same. Among consumers, 53% said it is ‘very important’ to include income protection when thinking about your retirement planning, compared with 33% of financial professionals, the study found.

“Unfortunately, the research also shows that many financial professionals are falling short of what their clients expect and want,” added Statler.

Additionally, 54% of consumers who work with a financial professional would grade them an “A” for how much they listen to and understand needs, the report says.

The Alliance for Lifetime Income is a Washington, D.C-based nonprofit that advocates for protected lifetime income in retirement. CANNEX Financial Exchanges is a Toronto-based pricing information provider, with a mission to provide access and transparency to the cost and features of retirement savings and retirement income products.

The study was conducted online by Artemis Strategy Group in April and May among 2,025 American consumers age 45 to 75, and 514 financial professionals who conduct retirement planning for individual clients. 

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