Retirement savings rates have decreased 0.20%, the number of participants taking out loans increased 13% and hardship withdrawals jumped 24%, over the last 12 months, new Empower data shows.

Average account balances for participants surveyed have declined by approximately 27%, over the last year, finds the research study, Empowering America’s Financial Journey – How People Save, Invest and Get Advice. The decline is due to poor investment performance that aligns with broad drops in equity and fixed income markets, Empower states in the study.

Several challenges to workers’ retirement preparedness are coalescing, explains Edmund F. Murphy III, president and CEO at Empower.

“When the economy is experiencing a downturn, American workers need guidance and support to help deter them from making financial decisions that may negatively affect them down the road,” he states in a press release.

Inflationary pressures from increased prices and market declines in 2022 are taking a toll on retirement savers, as many are being forced to prioritize short-term financial challenges over long-term goals, such as retirement, Empower finds.

Empower data also shows that more than nine of 10 respondents consider inflation a top concern, followed by recession fears at 85% and cost of health care at 83%. The study finds 50% of respondents have cut back on daily expenditures to counter inflation.

“We found that nearly half of Americans have cut back on daily expenses, created a budget or cut back on entertainment and one in five Baby Boomers and Gen Xers postponed retirement,” adds Luis Fleites, director of thought leadership for Empower.

The share of study respondents who consider retirement a top financial goal dropped to 53% from 67%, the study finds. Empower data also shows, for retirement plan participants, ‘making ends meet’ is now a top financial goal for 26% of Americans.

The study also finds, despite the “free money” reference to describe an employer’s matching contribution that almost 30% of participants aren’t maximizing their employers match and the percent increased to 48% for  — eligible workers who do not interact with the retirement plan — unengaged participants — compared to 22% of engaged participants.

Additionally, engaged participant savings rates are 56% higher than rates for unengaged participants, Empower data shows.

According to the study, when respondents were asked what actions — from a list of 14 — they have taken, plan to take or have plans to take to counter inflation 71% of Americans say they are not planning on selling assets or investments , compared to 16% who are planning to and 13% who have already.

The study finds 51% are not expecting to change their risk tolerance or approach to retirement investing and 75% are not planning to contribute less to their retirement savings accounts, compared to 12% who plan to decrease contributions and 13% who have done so.

Despite challenges facing retirement plan participants, “it’s encouraging to see that most savers haven’t changed their investment approach and are still focused on saving and planning for their future,” adds Murphy, in the release.

“This illustrates that while we are shifting our focus on short-term spending and planning for now, most savers are still trying to remain long-term focused,” says Fleites.

The study included key takeaway recommendations for plan sponsors to help bolster workers’ retirement readiness from survey respondents.

Empower said it was important to remember that respondents were asked what financial advice they would offer their younger selves, with saving early and as much as possible their overwhelming message:

• Save as much as you can: Target saving for retirement a total of 10% to 15% of income but if you can’t, save what you can.
• Max your match: Make sure you’re maximizing the employer retirement plan match.
• Save consistently: If you change jobs, don’t take time off from saving for retirement and don’t reduce your savings rate. The key is to save consistently.

The Empower survey was conducted by FGS Global on behalf of Empower. The study included an online survey of full-time employees at for-profit companies with access to a defined contribution plan offered by their employer and was conducted from August 2 to 14 with a sample size of 2,505 Americans between the ages of 18 and 70.

Empower recordkeeping data cover 4.3 million participant accounts with their current employer from primarily corporate defined contribution plans with balances greater than zero, according to the recordkeeper data.