Retirement Delays Create Challenges for Plan Sponsors

By Amelia Dunlap

Key Takeaways:

  • According to a new Nationwide Retirement Institute® survey, the overall outlook on retirement for Americans has changed significantly since 2021, as roughly one in four employees feel they are on the wrong track for retirement and fewer than six in 10 have a positive outlook on their retirement plan and financial investments.
  • The impacts of high inflation, market volatility and concerns about a future market crash have pushed more older Americans to make the difficult decision to postpone the end of their careers, and some now say they believe they will never be able to retire.
  • Recent economic strain and uncertainty has affected older and younger workers alike; the study found that employees aged 35-44 report in higher numbers than those 45+ that they feel confused or panicked about their retirement plans and financial investments.
  • When comparing employees across sectors, our study revealed that public sector employees are much more optimistic than private sector counterparts about their retirement preparedness and security.

It’s no secret that the recent economic conditions have had a sobering impact on the personal finances of millions of Americans, many of whom are feeling like their prospects for a secure retirement have been dashed.

According to a new Nationwide Retirement Institute® survey1, the number of retirement plan participants who are delaying their retirement has doubled in the past year. Last year, we found that the impacts of COVID-19 caused 20% of participants to delay their retirement. When we circled back to this group a year later, our survey revealed that challenging economic conditions since then have further eroded the confidence of U.S. workers – with 40% of workers now expecting to retire later than anticipated.

The impacts of high inflation, market volatility and concerns about a future market crash have pushed more older Americans to make the difficult decision to postpone the end of their careers, and some now say they believe they will never be able to retire. This highlights why it’s an important time for plan sponsors, and the financial professionals and consultants who support them, to help workers regain their retirement confidence.

For more on retirement delays disrupting the workforce, see this infographic.

Delayed retirements are holding employers back

The impact of this disturbing trend is affecting more than just employees. Plan sponsors are experiencing wide-ranging workforce challenges that could be leading to increases in “quiet quitting.” Over two thirds of plan sponsors report delayed, or canceled retirements are a concern as it impacts their ability to hire new talent or promote younger talent. Employers are also reporting that retirement delays are increasing their health and benefits plan costs.

These workplace decisions have begun to impact the wellbeing of employees as three in 10 plan sponsors have reported negative impacts to employees’ mental health and many are noticing lower workforce productivity and team morale.

Employees are worried about their long-term security amid a challenging economic environment

For American workers, the overall outlook on retirement has changed significantly since 2021, as roughly one in four employees feel they are on the wrong track for retirement and fewer than six in 10 have a positive outlook on their retirement plan and financial investments.

Younger employees are also feeling the strain. The study found that employees aged 35-44 report in higher numbers than those 45+ that they feel confused or panicked about their retirement plans and financial investments.

Public sector employees more optimistic

When comparing employees across sectors, our study revealed that public sector employees are much more optimistic than private sector counterparts about their retirement preparedness and security. The likely reason for this difference is probably based on the fact that public sector employees are more likely to have access to guaranteed income through a defined benefit plan, making their retirement outlook feel more predictable. In fact, we found that two thirds of employees with pensions have a positive outlook on their retirement plans and financial investments compared to only 57% those without pensions.

Employers can help their workforce regain retirement confidence

One way to help bridge this gap might be to offer guaranteed lifetime income solutions as part of the investment line-up within defined contribution plans.

The good news is that both plan sponsors and participants are interested in in-plan guarantee investment options. Our data highlights that more than half of employees are interested in guaranteed lifetime income investment options included as part of a target-date fund and 70% of employers are interested in adding a guaranteed lifetime income to their employer-sponsored retirement plans.

Employees also voiced interest in contributing to these investment options as part of a managed account and nine in ten said they would be at least somewhat likely roll over retirement savings into one if offered by their employer.

Now is the time for employers to work with their retirement plan advisor or consultant and record keepers to find the right investment solutions to address the challenges associated delayed retirements. Guaranteed lifetime income solutions can help set up a workforce for long-term financial security and set the stage for growth of the next generation of talent.

Nationwide’s guaranteed lifetime income solutions offer plan participants guaranteed income for life and protection against market volatility.

Nationwide offers educational resources for financial professionals, advisors and consultants. Plan sponsors should contact their Nationwide representative to learn more.


Sources and Disclaimer

1) Nationwide Retirement Institute® In Plan Sponsor SurveyEdelman Data and Intelligence (DxI) conducted an online survey on behalf of Nationwide from July 14 – August 5, 2022.
Provisions of these options may vary based on plan selection and/or by state regulation. These investment options may not be available in all states.
Guarantees are subject to the claims-paying ability of the issuing insurance company.

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