Retirement Strategies

Less Than Four In Ten Investors Have A Retirement Savings Target

Economic uncertainty has changed retirement expectations, causing Americans to scrap retirement plans

Nationwide’s ninth annual Advisor Authority study powered by the Nationwide Retirement Institute® explores critical issues confronting advisors, financial professionals and individual investors—and the innovative techniques that they need to succeed in today’s complex market.

COLUMBUS, Ohio, May 13, 2024 /PRNewswire/ — As economic ambiguity and inflation heighten investors’ retirement concerns, Americans are coming to terms with a difficult reality: their retirement prospects are more uncertain than they anticipated, and their inability to know what to expect in the future is throwing their plans into flux.

According to Nationwide’s ninth annual Advisor Authority survey, powered by the Nationwide Retirement Institute®, more than 6 in 10 (61%) investors say their expectations for retirement have changed significantly in the last five years, and nearly half say their dreams for retirement have been delayed, altered or cancelled as a result of the economic conditions seen in the last five years.

In the face of these headwinds, just 38% of investors believe in having a retirement savings target, or a specific savings goal for retirement. For those that do have a figure in mind, 42% of investors believe they need between $1 million and $2 million to retire, while 18% believe they need more than $2 million saved to comfortably retire.

“Americans believe they will need over $1 million to retire comfortably – a figure that could be discouraging for even the most committed retirement savers,” said Rona Guymon, Senior Vice President of Nationwide Annuity Distribution. “What’s important to remember is that everyone’s ‘magic number’ in retirement will vary depending on a number of variables including spending habits, health, debt levels, location and more. It’s good to have a goal in mind, but holistic financial planning with an advisor is more likely to lead to a comfortable retirement. At the end of the day, a magic number doesn’t tell you much about how long your income will last over an uncertain amount of time in retirement. That’s where holistic financial planning can make all the difference in the world to address the anxiety of a nervous investor.”

This lack of a ‘magic number’ and anxiety about an uncertain financial future is causing concern about affording necessary items in retirement. Investors age 55+ or currently in retirement are most worried about paying for basic living expenses (83%), medication and other health-related items (58%) and supplemental health insurance (39%) in retirement. To meet these financial commitments, this same cohort is foregoing big and small pleasures today, spending less on luxury goods (47%), leisure (44%), entertainment (44%) and vacations/trips (38%).

External Factors Sway Retirement Optimism

For many investors, the uncertain economic landscape presents an ongoing challenge to retirement planning. Three in 4 investors are concerned about a US economic recession in 2024, including 81% of those farthest from retirement (non-retired 18- to 54-year-olds).

As a result, nearly 1 in 3 (31%) non-retired investors believe an economic recession poses the most immediate challenge to their retirement portfolio over the next 12 months, and over half (53%) of non-retired investors expect interest rates to be increased 12 months from now.

These factors are forcing investors to consider a difficult reality — that the concept of an accessible and absolute retirement is no longer a realistic post-career possibility. More than a quarter (27%) of all non-retired investors would likely be forced to return to the workforce at some point due to inadequate savings if they retired in the next 12 months, and 1 in 5 (19%) non-retired investors are unsure if they will ever retire. What’s more, an additional 19% claim that they will retire later than planned because of inflation.

“While it’s understandable that the turbulent markets we’ve seen over the last few years have investors on edge, we no longer expect a recession in 2024 and still predict rate cuts will occur later this year,” said Mark Hackett, Chief of Investment Research at Nationwide Financial. “It’s important for investors to focus on what they can control in today’s economic environment, and one way they can do that is by working with their advisor or financial professional to establish or revisit their long-term plan to ensure it remains aligned with their retirement goals.”

Financial Advisors Identify With Their Clients’ Concerns

As investor concerns proliferate, financial advisors are providing strategic solutions to help ensure a stable retirement for clients. Nearly half of advisors (48%) say the rising cost of living has influenced their clients to rethink or redefine their retirement planning strategies.

What's important to remember is that everyone's 'magic number' in retirement will vary depending on a number of variables including spending habits, health, debt levels, location and more...

In addition, advisors say their clients are taking non-traditional, or in some cases, approaches that may lead to adverse outcomes to meet financial commitments in retirement. More than a third (34%) of advisors say their clients are drawing more funds from their retirement accounts to meet financial commitments. Nearly 1 in 4 (23%) financial advisors say their clients are liquidating assets, and 16% say their clients are moving in with adult children.

Financial advisors believe these adjustments are significantly changing their clients’ perceptions of retirement. Nearly half (47%) of advisors say working in retirement is one strategy their clients are using that would be considered radically different from that of their parents or grandparents. To help these clients protect their assets against market risk, advisors are using annuities (79%), diversification and non-correlated assets (77%) and liquid alternatives, such as mutual bonds or ETFs (58%).

“It’s clear that having a trusted advisor makes a difference when it comes to feeling confident about living comfortably in retirement,” Guymon said. “Advisors and financial professionals should seize this opportunity to engage with their clients to reinforce the importance of sticking to their long-term plan. Another way to address client anxiety around retirement goals is to help them understand the value of protection solutions, like annuities, which can guarantee income in retirement and guard against market volatility.”

For additional insights on this survey data, view this Nationwide infographic.

 

 

 

About Advisor Authority: Methodology
The research was conducted online within the U.S. by The Harris Poll on behalf of Nationwide from January 8-23, 2024, among 518 advisors and financial professionals and 2,346 investors ages 18+ with investable assets (IA) of $10K+. Investors included a subset of 391 “pre-retirees” age 55-65 who are not retired, and subsets of 346 single women and 726 married women.
Weighting: Raw data from advisors were not weighted and are therefore only representative of the individuals who completed the survey. Investor data are weighted where necessary by education, age by gender, race/ethnicity, region, marital status, household size, employment, household income, investable assets, and propensity to be online to bring them in line with their actual proportions in the population. To ensure the investor sample was representative, the data were initially weighted separately for those with investable assets of $10K to less than $100K and those with $100K+ and then post-weighted/combined into a total investor group. Data for the subset of pre-retirees age 55-65 who are not retired were weighted separately as needed by education, age by gender, race/ethnicity, region, marital status, household size, employment, household income, investable assets and propensity to be online.
Respondents for this survey were selected from among those who have agreed to participate in our surveys. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within + 2.8 percentage points using a 95% confidence level. This credible interval will be wider among subsets of the surveyed population of interest. The sample data for the subset of pre-retirees age 55-65 who are not retired is accurate to within + 6.2 percentage points using a 95% confidence level.
All sample surveys and polls, whether or not they use probability sampling, are subject to other multiple sources of error which are most often not possible to quantify or estimate, including, but not limited to coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments.
About The Harris Poll
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas: building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.
About Nationwide
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; and pet, motorcycle and boat insurance.
For more information, visit www.nationwide.com.

 

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