Investors Dealing With Inflation ‘Sticker Shock’

Investors at or near retirement age are evenly split on their outlook for the economy, but nearly all said they have experienced the “sticker shock” of inflated prices at the grocery store, gas stations and restaurants.

The 2022 Investor Outlook survey by Global Atlantic Financial Group found a high level of concern that low interest rates will impact investors’ ability to grow assets and rising inflation will make it harder to create an income stream to last throughout their retirement.

The study was conducted with more than 1,000 experienced investors ages 55-70 with $250,000 to $2 million in assets.

“This is a unique group of people because they are in the middle of making decisions about how to spend their time and money in retirement,” the survey said. “They are the next generation of retirees.”

Retirement Fears

Most of the respondents (57%) believed inflation will get higher in 2022 and 67% are worried they won’t have enough to live comfortably in retirement due to inflation.

“What really jumps out to me is the 20% gap between people who have witnessed the rise of inflation and those who think it will affect their retirement,” said Paula Nelson, managing director and head of growth strategy with Global Atlantic. “While nearly 90% have experienced sticker shock recently, just 70% are concerned about inflation’s effect on their retirement income. This could be a painful lesson for people who don’t make the connection.”

Annuity owners are more comfortable with their investments, the survey found, compared to non-annuity holders. Sixty-two percent of those with an annuity said they believed their money saved will last the rest of their life, while 48% of those without an annuity didn’t think so.

“I think people growing more concerned with the long-term effect of low interest rates on their retirement savings and are also becoming more aware of the importance of protecting their assets in a way that can generate lifetime income,” Nelson said. “Annuities are a great option for both challenges, but the industry needs to do a better job at increasing the number of financial professionals who routinely offer annuities as a retirement tool.”

The economic outlook among the surveyed group was split right down the middle with 41% very or somewhat optimistic, and 40% very or somewhat pessimistic about the year.

'A Growing Subset'

Global Atlantic added a question testing investor interest in climate-conscious or environmentally aware investments with somewhat surprising results.

“Climate awareness is a hot topic among a growing subset of investors today,” said Nelson. “We were interested in learning how meaningful it is within the retirement demographic.“

Fewer than one in 10 actively look for such investments while more than six in 10 said they have some interest. Among the gender breakdown, 46% of the men said they weren’t interested in climate-conscious investment, while 33% had no interest.

“Though most people are not actively seeking these options in their retirement portfolio, more than half are interested in them,” Nelson noted. “I think that interest is going to grow and as an industry, we need to be sensitive to that, through our own corporate ESG efforts, as well as providing accessibility though our products.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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