Inflation causing most Americans to stop or reduce retirement saving

MINNEAPOLIS – Oct. 26, 2022 – The impact of 40-year high inflation is hitting savings accounts as a majority of Americans say they are stopping or reducing retirement savings because of inflation. More than half (54%) of Americans say they have stopped or reduced retirement savings due to inflation, according to the 2022 Q3 Quarterly Market Perceptions Study from Allianz Life. Furthermore, more than four in 10 (43%) say they have had to dip into their retirement savings because of rising inflation.

The vast majority of respondents (80%) say they worry about rising inflation continuing to have a negative impact on the purchasing power of their income in the next six months, while 75% say they are worried the rising cost of living will affect their retirement plans. More than three in four respondents (78%) said a guaranteed lifetime income options (such as an annuity) as part of their retirement strategy would ease concerns about inflation.

 

“Inflation is not going away tomorrow,” said Kelly LaVigne, VP of Consumer Insights, Allianz Life. “While we all hope that the pace of inflation will slow, it will take time to moderate. Consumers need to prepare themselves by talking to a financial professional and incorporating some ways to help fight the effects of inflation into their portfolio so that long-term inflation doesn’t affect retirement.”

 

The study also found that millennials are the most likely to say they have stopped or reduced retirement savings due to inflation (65%). In contrast, 40% of boomers and 59% of Gen Xers said the same.

 

At the same time, Gen Xers are more likely to worry about how inflation will affect their long-term finances. Nearly three in four (72%) worry that if they don’t increase their retirement savings soon, it will be too late to have a comfortable retirement. More Gen Xers (80%) worry that the rising cost of living will affect their retirement plans than millennials (76%) and boomers (72%).

 

Americans are worried about the economy

 

Overall, Americans continue to be pessimistic about the economy with 62% worrying that a major recession is right around the corner. This worry about a recession has been consistently higher throughout 2022 compared to 2021. This persistent concern is likely driven by the fact that the majority of Americans (78%) worry current world tension will cause a recession and 70% worry midterm elections will cause more market volatility. This outlook is having a clear effect on investment habits with 71% saying they are keeping some money out of the market to protect it from loss, a number that has been steadily increasing over the past year.

 

Yet, more Americans say they are ready to invest. For the first time in a year, the number of Americans who are ready to invest right now increased (from 17% last quarter to 26% in Q3). Millennials are more likely to say they feel comfortable with current market conditions and are ready to invest (40%) than Gen Xers (26%) and Boomers (15%).

 

More than two-thirds of Americans (67%) say they are nervous about investing but don’t want to miss out on a recovery. Millennials are the most torn about investing with 76% saying they are nervous to invest but don’t want to miss out on a recovery. Fewer Gen Xers (66%) and boomers (59%) said the same.

 

Millennials are also more likely to say it is a good time to invest in the market (46%) than both Gen Xers (32%) and boomers (23%).