"Are we there yet?" Workers worried about reaching retirement goals

One-quarter of Americans are less confident about reaching their retirement goals than they were before the pandemic began two years ago. In addition, nearly three-fourths are concerned about the impact of inflation on retirement preparedness, and almost one-third don’t know how to make sure their retirement savings keep pace.

“With so much uncertainty in the world, people understandably have concerns on a variety of fronts, and ‘Are we there yet?’ has to be on the minds of many,” said Rita Assaf, vice president of retirement at Fidelity Investments.

“The good news is, although the pandemic impacted us in many ways, from a financial perspective, our study shows having a plan in place is one solid way to help you weather any storm.”

Optimism, be-fi, robo-advisors

Despite the concerns, investors appear to be growing more optimistic, according to Fidelity’s 2022 State of Retirement Planning Study. The majority of Americans have put good financial behaviors in place and set practical post-pandemic priorities. One increasing sign of the times is the emerging use of robo-advisors to help with retirement decisions, particularly among younger investors. In fact, 61 percent of the next generation of investors say they like using a robo-advisor to help navigate their next steps, compared to 35 percent of the general population.

No point in saving for retirement?

In addition to these positive changes, however, several actions — or inactions — have taken place, often by necessity, during the pandemic and the resulting Great Resignation that may require some course correction. Fifty-five percent of the next generation say they put their retirement planning on hold during the pandemic, which is much higher than the general population (41 percent). Almost half of younger investors don’t see a point in saving for retirement until things return to normal.

Worrisome Gen X

Inertia is not a problem reserved only for the young. When it comes to Gen X, the view of the state of their retirement savings is by far the gloomiest among those who say their retirement plans have been negatively affected by the pandemic.

More than one-quarter estimate being four to five years away from getting back on track or admit they are completely off track. This is a concerning prospect, because the oldest Gen Xers are now five years away from reaching the qualifying retirement age of 62. Many in Gen X also have fallen behind in other areas.

Where did you hear THAT information?

Drawing down too quickly on a retirement nest egg that was decades in the making also may be an area of concern. One in five respondents believed a financial professional would recommend a withdrawal rate of 10 percent to 15 percent of retirement savings every year.

In fact, withdrawing that amount would be far above Fidelity’s suggestion to withdraw no more than 4 percent to 5 percent from savings yearly and could lead to depleting savings far too quickly. Of immediate concern, this view was held by 20 percent of Gen Xers and 15 percent of boomers.

Power of planning

Investors with a plan already in place fared better than those without a plan. The power of planning can have a profound impact on peace of mind, as well as on confidence about retirement, both short- and long-term. Those with a plan in place:

• Feel more confident about being able to retire when and how they want (91 percent with a plan vs. 67 percent without); are more likely to know how much money they’ll need to retire (84 percent with a plan vs. 56 percent without a plan); and when they want to retire (84 percent with a plan vs. 59 percent without).
• Are more likely to say they know what to do to keep up with inflation (77 percent with a plan vs. 57 percent without) and are less likely to say they plan to retire later because of the pandemic (16 percent with a plan vs. 29 percent without).

“For those who put their retirement plans on pause during the pandemic, now may be the perfect time to move back into action,” the survey report concluded. “Here’s one powerful reason: It can make you feel better. In fact, when looking at major financial milestones, planning for retirement is the only area where people tend to be more motivated by the planning rather than excited about the day it happens.”