Workers and Retirees are not as confident about their financial future as they once were. Working Americans’ confidence in their ability to retire comfortably declined significantly in 2023. In addition, both workers and retirees are worried about the impact inflation will have on their savings and spending.
These are the findings from the 33rd Retirement Confidence Survey (RCS), conducted by the Employee Benefit Research Institute (EBRI) and Greenwald Research. The Retirement Confidence Survey is the longest-running survey of its kind measuring worker and retiree confidence.
“The last time a decline in confidence of this magnitude occurred was in 2008 during the global financial crisis. This shows that the current economic climate, in particular inflation, is eroding the confidence that Americans had in their retirement preparations going into the pandemic,” said Craig Copeland, director, Wealth Benefits Research, EBRI in a statement.
Key findings in the 2023 RCS report include:
- Americans’ confidence that they will have enough money to live comfortably throughout retirement declines. Compared with 2022, both workers and retirees’ confidence in having enough money to live comfortably throughout retirement significantly dropped from 73% in 2022 for those being very or somewhat confident to 64% among workers, and from 77% to 73% among retirees. Eighteen percent of workers report feeling very confident, and while retirees’ confidence is slightly higher than workers’, still only 27% say they feel very confident. Among those who do not feel confident, 4 in 10 workers and a quarter of retirees state it is due to having little to no savings. Inflation also has a large impact on Americans’ certainty, with 29% of workers and 42% of retirees stating this is the reason for their lack of confidence.
- Both workers and retirees report high concerns about inflation and its impact on their savings and spending. The effects of inflation are heavy on Americans’ minds, as 84% of workers and 67% of retirees are concerned that the increasing cost of living will make it harder for them to save money. Four in 10 workers and 3 in 10 retirees are not confident their money will be able to keep up with inflation in retirement, which is a significant increase compared with the third of workers who felt this way last year. Americans’ ability to finance their expenses is in question, as 73% of workers and 58% of retirees are concerned that they will have to make substantial cuts to their spending due to inflation.
- While Americans try to prepare for retirement, decreases in retirement accounts have caused concern. Half of Americans have tried to calculate how much money they will need to save to have a comfortable retirement. At least 7 in 10 workers and retirees say they have personally saved money for retirement. However, Americans’ retirement savings have taken a hit this year. Forty percent of workers and 58% of retirees report that their retirement account balances have decreased over the past 12 months.
- Understanding of retirement plan investment options is lacking for some and many don’t consider their plan provider a go-to source for retirement planning information and advice. Many workers feel they understand the investment options their workplace retirement plan offers. Seven in 10 workers are confident they can choose the right investment options for their situation. However, about 4 in 10 admit they don’t understand Target Date Funds, 3 in 10 workers don’t understand Managed Accounts and half do not understand ESG investment options. Many workers aren’t using professional sources of information and advice that can help improve their investment know-how. A large portion of workers (40%) turn to their family or friends when seeking information about retirement planning, while only 2 in 10 turn to their workplace retirement plan provider.
- When describing their asset goals, half of retirees report they try to maintain their asset levels. Fewer than last year aim to grow their assets. Additionally, two-thirds of retirees report their financial priority in retirement is income stability over maintaining wealth. Workers share this sentiment as almost three-quarters say they would prioritize income stability.
The 2023 survey of 2,537 Americans was conducted online from Jan. 5 through Feb. 2, 2023. All respondents were ages 25 or older. The survey included 1,320 workers and 1,217 retirees.
The findings indicate that there is still much work to be done when it comes to educating American workers on the investment options in their workplace retirement plans. In addition, it appears that workers could benefit from additional education and personalized advice from a financial professional about appropriate lifetime income and withdrawal strategies to help them make the most of their assets in retirement. Continued efforts on these fronts will hopefully serve to improve Americans’ retirement confidence and readiness in the future.