Tackling the Trend

January 4, 2023 | Article | 3 min | Business Insights

Dealing with inflation’s negative effect on employee retirement planning

An August 2022 survey from Nationwide Retirement Institute found that 40% of workers age 45 and older plan to delay their retirement due to inflation and rising living costs. That figure is double the percentage of workers who said they delayed retirement last year due to the COVID-19 pandemic. While the current inflationary environment presents a host of retirement plan challenges for both employers and employees, tackling the trend with prudent and sensible solutions remains the best course of action.

Inherent Costs to Employers

The 2022 Nationwide In-Plan Lifetime Income Survey indicates that 36% of private-sector employers say workers’ delayed retirements have affected their ability to hire new talent. In addition, 34% said delayed retirements have affected promoting young workers and 35% said they have made their health benefits plans more expensive.

Nationwide also found that employers are reporting effects to the well-being of their employees because of delayed retirements. Data show that among employers:

  • 30% reported lower team morale
  • 29% reported negative effects on employees’ mental health
  • 27% have noticed lower workforce productivity
  • 22% reported negative effects on the physical health of employees.

The study also found that only 58% of workers have a positive outlook on their retirement plan and financial investments, compared with 72% in 2021.

Potential Solutions To Consider

The survey found that 66% of all employees cited inflation as a top retirement concern, versus 53% in 2021. General education campaigns, in partnership with your plan advisor and recordkeeper, should continue to be prioritized and promoted. Focused topics for consideration include defining inflation and current contributing issues and factors, historical contexts, managing inflation risk in your portfolio and staying the course over the long term. These topics could be supplemented with information on general financial wellness, such as budgeting and managing spending, paying down high-interest debt and building an emergency fund.

In addition, plan sponsors may want to consider ways to further support their older workforce and improve their confidence in meeting their income needs as they near retirement. The Nationwide report shows growing interest from workers in lifetime income investment options. According to the data, 53% of all employees age 45 and older are interested in guaranteed lifetime income investment options included as part of a target-date fund, compared with 42% in 2021; 48% reported they are interested in contributing to such investment options as part of a managed account; and 41% would likely roll over retirement savings into a guaranteed lifetime income investment option if they had the chance.

The 2022 Nationwide In-Plan Lifetime Income Survey can be viewed at: https://news.nationwide.com/download/1245328/nationwideinplansurvey2022pnm-19694ao.pdf.

Heartland Retirement Plan Services are offered through Dubuque Bank and Trust Company. The information provided herein is general in nature and is not intended to be nor should be construed as specific investment, legal or tax advice. The factual information has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. Heartland Retirement Plan Services makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, it. Products offered through Heartland Retirement Plan Services are not FDIC insured, are not bank guaranteed and may lose value, unless otherwise noted.