Inflation, US Workers’ Recession Fears Force Delayed Retirement

Workers grappling with the effects of the current economic climate have re-envisioned their retirement because of increased prices and fears of a recession, according to new data from Franklin Templeton Investments.

Inflation, market volatility and historic drawdowns have forced workers to reassess their retirement plans, according to the 2023 Voice of the American Worker Survey.

The report found 73% of workers agreed that inflation directly threatens their retirement plans, and 63% said the current economic climate has affected their plans to retire early.

The research showed that employees have delayed their planned retirement age an average of three years—to age 65 from age 62—and 61% feel their retirement plans are in jeopardy, while 73% agreed with the statement, “The soaring living expenses changed the way I envisioned my retirement.”

“With the stress of a potential recession on the horizon, it’s critical for employers to check in with their employees to see how they’re feeling and offer comprehensive, personalized support,” stated Yaqub Ahmed, head of U.S. retirement, insurance and 529 plans at Franklin Templeton, in a press release.  

Data from the Bureau of Economic Analysis, an agency of the Department of Commerce, show U.S. gross domestic product increased at an annual rate of 2.9% in the fourth quarter of 2022, after increasing 3.9% in the third quarter, following two consecutive quarters with decreases, earlier in the year.

Although workers believe their plans to retire are at risk, many employees remain focused on saving for retirement, with 57% more likely to contribute to their retirement account than to stop saving altogether, the report finds.

Franklin Templeton Investments also found 64% of respondents agreed that their financial independence is in jeopardy due to the current economic situation, and 49% feel uncertain about their job stability—including a full 60% of Millennials—because of economic conditions.

With workers feeling elevated levels of financial stress, employers have an opportunity to build trust by checking in with their workforce, Ahmed added.

“Providing employees with a network of resources in times of uncertainty may help improve wellness across all dimensions—financial, physical and mental—ultimately, enhancing productivity at work,” said Ahmed.

What’s Changed in 2023

Franklin Templeton found that 52% of workers plan to pursue a phased retirement, compared to 47% in the 2022 report and 44% in 2021.

The research showed a seven-percentage point increase year-over-year—to 42% from 35%—of workers feeling highly stressed by their financial health. Franklin Templeton Investments also found a five-percentage point increase—to 74% from 69%—for workers who said achieving financial independence is their top financial concern, and a seven-percentage point  spike—to 61% from 54%–for employees who agreed that paying off debt is top of mind.

Achieving financial independence, at 81%, remained the primary goal for workers surveyed in 2022.

Employer Options

Higher expenses due to increased inflation has caused stress that likely impacts most workers, but plan sponsors still have some options.

“If employers are unable to increase employees’ pay, they should consider offering benefits and incentives that could be just as impactful,” the report stated.

Personalized benefit offerings and appropriate financial wellness tools are among the options for employers to mitigate employee financial stress, the report advised.

For 52% of workers, the most preferred benefit is increased pay, but 41% answered a boosted 401(k) match amount, and 25% preferred an investment with a guaranteed portion of retirement income.

The report was conducted by the Harris Poll LLC, on behalf of Franklin Templeton, from October 17 to October 27, 2022, among 1,000 employed U.S. adults.