Retirement confidence takes a big hit in 2023: Largest drop since 2008

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Both working and retired Americans are feeling significantly less confident about their finances and are concerned about the impact of inflation on their savings and spending.

“The last time a decline in confidence of this magnitude occurred was in 2008 during the global financial crisis,” said Craig Copeland, director of wealth benefits research for EBRI.

“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.”

Copeland discussed EBRI’s most recent research in the June 6 webinar Surprises and Expectations from the 2023 Retirement Confidence Survey. In 2022, EBRI found that 73% of workers were very or somewhat confident that they would have enough money to live comfortably through their retirement. In 2023, that number declined to 64%.

“Why were people confident or not confident?” he asked. “The biggest thing for those who were confident was that they had saved enough and had the means to pay their bills. For those who were not confident, it was because they had not saved enough. The key indicator is whether people had saved enough.”

The top concerns vary a bit between current workers and retirees.

“Workers worry that their salaries won’t keep up with inflation and report more debt, while retirees worry about cost of living and expenses,” said Lisa Greenwald, CEO of Greenwald Research, which partnered with EBRI on the study. “Half of retirees report that their overall spending is higher than expected, an increase over last year’s one-third, and the share of retirees who feel their retirement lifestyle is worse than they expected is slowly growing.”

Forty-six percent of workers said they need to save $1 million or more by retirement.

“Those who did the calculations thought they needed more money than those who didn’t do the calculations,” Copeland said. “There is more concern about the amount they think they need to have saved. Only two-thirds of workers said they have saved for retirement, and virtually all of them currently are saving. They are in the habit, so it’s a matter of getting the others to save — and save enough.”

Among the other key findings:

• 84% of workers and two-thirds of retirees are concerned that the increasing cost of living will make it harder for them to save money. Three-fourths of workers and 58% of retirees worry they will have to make substantial cuts to their spending because of inflation.
• Despite confidence in their financial knowledge remaining high, workers’ debt problems appear to be worsening in 2023. More than six in 10 workers and one-third of retirees report that their debt is a problem.
• 40% of workers and 58% of retirees said their retirement account balances have decreased over the past 12 months.
• Many workers aren’t using professional sources of information and advice that can help improve their investment knowhow, with only 20% turning to their workplace retirement plan provider.
• Workers’ confidence in Medicare has significantly decreased, with just half feeling at least somewhat confident it will continue to provide benefits that are of equal value to today.
• Despite being down from last year, nearly two-thirds of workers remain confident they know how much to withdraw from their savings and investments in retirement.
• 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.

Related: Most workers expect to fall short of $1 million retirement savings goal

The survey results point to an opportunity for employers and financial advisors to help workers shore up their retirement planning and savings.

“The big factors are getting people into retirement plans and getting them to build up their assets for retirement,” Copeland said. “Getting that money out of their paychecks – or even before it goes into their paychecks – and into a plan contribution at work can really change what people have for retirement.”