In spite of the impact of the pandemic that has lasted for more than two years, American workers and retirees remain optimistic about living a comfortable retirement. However, inflation and the cost of living are cited most often as reasons for their feeling less confident about their retirement prospects.
Workers want to focus on their retirement savings but face many challenges, especially debt. These findings are from the 32nd annual Retirement Confidence Survey, conducted by the Employee Benefit Research Institute and Greenwald Research.
“Even with the concerns of the pandemic and rising prices, overall, American workers and retirees still feel positive about their retirements,” said Craig Copeland, director of wealth benefits research, EBRI. “The Americans who are more likely to feel that their futures appear grim since the pandemic are those who were already pessimistic about their futures due to lower incomes, problems with debt, or lower health status.”
Retirees report that their lifestyle and spending in retirement for the most part are as expected, but slightly more than 1 in 3 suggest that overall spending is higher than expected. This is an increase in the number of those reporting higher spending, compared with the one-quarter who reported higher expenses in 2021, the survey said. Furthermore, compared with 2021, a larger share of retirees suggest spending on housing is higher than expected, and more indicate that spending on travel and leisure is higher than expected.
In addition to these findings, the survey noted that the pandemic’s impact has been more muted for retirees’ confidence than for workers’ confidence. Nearly 7 in 10 retirees report that the pandemic has not changed their confidence in their ability to live comfortably throughout their retirement. However, only half of workers report this.
Also, although having saved is bolstering retiree confidence, fears about inflation are eroding it. Almost three-quarters of retirees who feel more confident in their ability to live comfortably through retirement since the pandemic report it was due to having money in savings or having good investments. But half of retirees who feel less confident say that it was due to inflation.
Something that is also challenging retirement preparedness for many of those surveyed is debt. Nearly half of workers say debt has negatively impacted their ability to save for retirement, and more so than it was last year, over 1 in 4 retirees say debt has impacted their ability to live comfortably in retirement.
In addition, according to the survey, many Americans don’t know where to go or who to trust for financial and retirement-planning information. Almost 4 in 10 workers and 2 in 10 retirees say they don’t know who to go to for financial and retirement-planning advice. Many turn to non-professional sources, like family and friends (35% of workers and 21% of retirees), or go online to do their own research (29% of workers and 23% of retirees).
Other survey findings are:
Workers remain satisfied with their workplace-retirement savings plans and with the tools and resources available. More than 4 in 5 workers who are offered a workplace retirement savings plan are satisfied with the benefit. This is important, given the fact that workers (82%) remain far more likely than current retirees (47%) to expect their workplace defined-contribution retirement plan to be a source of income in retirement.
Most retirees report their overall lifestyle and expenses are as expected. However, up from last year, over 1 in 3 find overall expenses to be higher than expected. Four in five retirees report that their overall lifestyle — including traveling, spending time with family, or volunteering — is as expected or better. More than 1 in 4 say their retirement lifestyle is better than they expected.
Workers’ confidence in Medicare and Social Security holds, but retiree confidence in Medicare declines. Three-quarters of retirees and two-thirds of workers feel confident they will have enough money to take care of medical expenses in retirement.
The survey of 2,677 Americans was conducted online from January 4–26, 2022. All respondents were ages 25 or older and included 1,545 workers and 1,132 retirees. This year, the survey included an oversample of roughly 807 completed surveys among LGBTQ individuals (639 workers and 168 retirees).
Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].