Saving for Retirement Stays a Top Goal Amid Recession Fears

While businesses generally remain financially stable, many are taking steps to brace for a possible recession in the next six months, new data show.

The Principal Financial Well-Being Index found that 65% of employers and 73% of employees expect an economic slump. Despite these fears, 45% of employees surveyed said they will not reduce their saving for retirement. 

While employers and employees align on the top current concerns—inflation, recession and the cost of health care—the groups diverge in other areas, the index says.

“Employers and employees are generally aligned on their top three concerns, but there’s a significant disconnect once you move beyond that,” Amy Friedrich, president of U.S. insurance solutions at Principal, said in a statement. “Businesses have a lot on their plate and are focused on direct impacts to their business. Employees are much more focused on their personal well-being.”

The index examined the top current concerns for employers and employees by having respondents rank how large a concern each topic was for them on a scale from zero to four. On average, economic inflation was ranked 2.81 by both groups, while employers ranked a potential upcoming recession 2.80 and employees ranked it 2.51; the survey also found that the cost of health care was ranked 2.72 by employers and 2.40 by employees.   

The next biggest concern for employers was higher taxes, at 2.64; benefits inflation, at 2.63; and rising interest rates, at 2.62. For workers, the next three concerns were protecting their health at work in the era of COVID-19, at 1.88; concerns for their mental health and well-being, at 1.84; and the impacts of COVID-19 on company and office culture, at 1.83.

Employees’ next biggest concern—feeling “burnt out” at their current job, at 1.78—is “the most polarizing concern,” according to the index, as it doesn’t crack the top 10 among employers.   

These discrepancies could have broader workplace ramifications, Friedrich added. 

“This disconnect will have implications for businesses moving forward since meeting employees’ needs through culture and benefits ties to employee engagement and is a critical component of talent retention today,” she said.

Notably, employers and employees agree that the top causes of burnout are heavy workload, at 54%, and a lack of flexible shifts for employees, at 41%.

With employers and employees expecting a recession, each group has taken steps to prepare to reduce spending and increase savings, according to Principal.

Among businesses, 35% reported having reduced operational costs, another 35% reported raising prices on goods and services and 31% increased cash reserves; among employees, 40% reported plans to take a second job for additional income and 37% reported searching for a new job with better pay and/or benefits.

In addition, among all businesses, 55% of employers said they would not reduce employee salaries to prepare for a recession, 49% said they would avoid layoffs, 47% said they would not reduce benefits and 45% said they would not reduce the employer-paid portion of benefits offered, according to Principal.

“Small businesses learned a lot from the 2008 recession, and many learned they can make adjustments that will minimize the impact on salaries or staff during future periods of economic stress,” said Friedrich. “Small businesses are dedicated to their employees. We saw that during the pandemic, and I think we’ll see the same creativity and resiliency if pressures mount in the near-term.”

For employees, 55% reported that they have increased shopping for cheaper products, 55% reported that they have reduced spending on luxury goods and 47% reported that they have started or continued building an emergency savings fund. On the flipside, 50% said they would not sell or downsize their personal property, 42% would not seek additional education or training and 39% would not seek a new job in search of flexibility to work remotely, the survey found.   

The index also examined business trends, and found that among large businesses—employers with 500 to 1,000 employees—65% consider their businesses to be growing, compared with 36% that consider their businesses stable. Among small businesses—those with 2 to 499 employees—46% consider their businesses growing and 49% consider them stable.

The survey also found that from June 2021 to July 2022, the gap between small and large businesses that reported their financials shrank 13 percentage points, to 12 points from 25.

The Principal survey was conducted online by Dynata from July 7 to July 20, with 500 business owners and 200 employees.