Is this a financial crisis? 4 in 10 retirement savers say yes, though generations diverge

Americans are bracing for another financial crisis as signs of a recession – including bank failures, persistent inflation, ongoing volatility and the possibility of a government debt ceiling crisis – heighten anxiety. The eighth annual Advisor Authority study by the Nationwide Retirement Institute found that 30% of investors are certain another financial crisis is on the horizon and four in 10 investors feel that the U.S. is already in one.

In addition, the survey found that of those who have lived through a prior financial crisis, only 36% have confidence in surviving another one. About one-fifth of investors expect to face two more financial crises in their lifetime and 43% expect to face three more.

With more experience weathering downturns, as well as more on the line in terms of investments that are vulnerable to market swings and less time to make up for savings lost in a downturn, older generations tended toward a pessimistic view of current and future financial challenges, while 38% of Gen X and 29% of baby boomer investors expect a prolonged period of severe downturn marked by stagflation and instability. They also don’t expect this to be the last crisis they live through. Two-thirds of Gen X and almost half of baby boomers expect to live through at least two more financial crises in their lifetimes.

Related: Gen Z, millennials, Gen X & boomers: How each generation plans to save, invest in 2023

Meanwhile, younger generations are concerned but more optimistic. 58% of millennials and 49% of Gen Z investors expect to live through at least three additional financial crises. However, these investors remain optimistic about their retirement journey, with 56% of Gen Z and 50% of millennials saying they still expect to retire on time.

“It’s natural for the average investor to feel nervous – and it’s instinctive to brace for the worst – particularly for those who lived through previous financial crises like the one we experienced in 2008,” said Eric Henderson, president, Nationwide Annuity. “It’s important to remind retirement savers that they don’t have to figure this out by themselves. Whether that means working with a financial professional or tapping into resources available through their workplace retirement plan, they don’t have to go it alone.”

Across all generations, having a plan tends to ease anxiety, since 88% of investors feel more confident that they can make the right investment decisions even during extreme financial crises by having a plan for their investments. Investors with an advisor feel less nervous and more confident than those without an advisor in their ability to protect their finances in the event of another financial crisis after living through prior episodes.

“Many workplace retirement plans offer tools and advice to help nervous participants stay on track and make informed decisions,” said Henderson. “Traditionally, many defined contribution plans have focused on helping savers accumulate assets. However, we’re seeing a shift in plan sponsors developing more outcome-focused approaches. Some are beginning to offer tools and solutions, like in-plan guarantees that can help participants turn their savings into guaranteed income they can rely on in retirement, just like they rely on their paycheck while they are working. This can help them feel more confident in their ability to achieve a secure retirement and not have to worry as much about short-term financial volatility impacting their long-term plan.”

.Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel.