Two-fifths of older workers are ‘delaying retirement’ due to inflation and markets

There’s a new poll, and just about everything in it depresses me.

Confidence in retirement is down.

Retirement anxiety is on the rise.

Women in particular sacrifice their own retirement plans to provide financial assistance to “family members” (adult children, presumably) or friends.

The key insights into retirement are tiny.

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Oh, and apparently all of this is nothing new for people who run US defined contribution pension plans – 401(k) and the like. Survey results suggest they rarely speak to those affected by the plan and have no idea what they are thinking and feeling.

The survey, carried out by Nationwide, focused on workers over the age of 45 as well as plan sponsors who manage their retirement plans. (It was made last July and August, so it’s a bit behind the curve – more on that below.)

“The vast majority of plan sponsors believe that employees have a positive view of their retirement plan and financial investments…and that they are on the right track when it comes to retirement,” reports the Nationwide Insurance Company. The percentage of plan sponsors who think employees are satisfied ranges between 81% and 96%, depending on the question they asked and whether they spoke to government or private sector plan sponsors.

Encourage laughter.

In fact, only 58% of these workers are happy. Well below 81% to 96%.

Oh, and that number has plunged in a year, from just 72% a year ago.

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Plan sponsors believe that workers are satisfied with the investment options available in their 401(k) plan. The workers? Not really.

“The majority of plan sponsors believe that the average employee is satisfied with the investment options offered under their employer’s retirement plan (81% company, 94% government),” reports Nationwide, “but this sentiment does not reflected only by just over half of the employees– and in fewer numbers than 2021.”

A surprising 40% of workers over the age of 45 say they now expect to postpone retirement due to the 2022 inflation crisis and subsequent financial turmoil. And the delays are substantial. Across the survey, workers over 45 now plan to wait until they are over 68 to retire. A year earlier, when markets were booming and inflation was stable, they were on 65.

The S&P 500 SPX,
+1.38%
fell 18% last year, even including dividends, while the bond market was down 13%.

Incidentally, a recent study by the St. Louis Federal Reserve found that the average American between the ages of 55 and 74 lost $100,000 in wealth between January and October last year due to the turmoil – and estimates that this loss of wealth pushed an astonishing 170,000 more people of 55 to fire a Tom Brady, “retire” and return to the workforce.

The gloom is particularly severe among women, reports Nationwide. The number of women expecting to delay their retirement, if necessary indefinitely, more than doubled in the past year to an astonishing 62%. The percentage of women worried about their retirement plans and investments jumped by half to 56%.

Of women who expected to delay retirement, one in six told the poll they were doing so because they were providing financial support to a family member or friend ‘due to inflation’ .

This, at a time when the number of unfilled vacancies is almost twice as high as the number of unemployed.

But it’s no surprise people are freaking out about retirement when they don’t know how to handle the numbers. Writes Nationwide’s Bethany Eippert, “About half (51%) of participants face challenges turning their retirement savings into retirement income. Only 4% of women are moderately or extremely familiar with retirement planning for decumulation.

Yes, 4%.

Imagine trying to drive across the country without GPS or a map. It’s crazy.

It is too easy to say that these figures reflect the inflationary panic of last summer. In fact, although inflation fears have since eased somewhat, portfolios have not improved. For example, the Vanguard Balanced Index Fund VBAIX,
+0.96%,
which tracks a typical portfolio of 60% US stocks and 40% US bonds, is actually lower than it was in July and August.

Meanwhile, annuity payout rates are coming down, after peaking in October.

Immediate life annuities (sold by insurance companies such as Nationwide) are products that can provide guaranteed income for life in retirement. So people in their 40s, 50s and 60s would be depressed by the drop in rates, except apparently no one has bothered to explain to them what these annuities are or why they might need them.

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