Retiring at 65? Not so much, say 7 in 10 pre-retirees

“Many of us watched our parents and grandparents enjoy a smooth transition to a secure retirement powered by traditional pension benefits,” said Eric Henderson, President of Nationwide Annuity. “Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement.”

That’s the gist of the latest Advisor Authority, a study conducted by Harris Poll on behalf of the Nationwide Retirement Institute that surveyed 518 advisors and financial professionals and 2,346 investors from January 8-23, 2024. In a year when more Americans than ever are turning 65, pre-retirees (defined as non-retired investors aged 55-65) are feeling more apprehensive about retirement than the recent cohorts that preceded them.

According to the poll, 67% of pre-retirees anticipated facing more challenges in retirement than their parents or grandparents, while 41% said they could continue working in retirement to supplement their income out of necessity. Over a quarter (27%) said they planned to live frugally to meet their retirement goals.

Twin challenge of inflation and diminished benefits

Inflation and diminished trust in traditional financial safeguards are two main factors driving the generation’s attitudes about retirement: 57% of pre-retiree respondents said they believed inflation posed the most immediate challenge to their retirement portfolios over the next year, while 27% said they were saving less for retirement due to inflation. At the same time, pre-retirees of today have less trust in Social Security benefits: 43% said they were not counting on Social Security benefits as much as previously expected, while 27% said they expected to receive less in benefits than they’d anticipated.

Planning is more important than ever

The current economic challenges make sound planning all the more important. This is a point stressed by Nationwide’s Henderson, who, as you’d expect, recommends hiring a financial advisor: “The final years leading up to retirement are a critical time for making decisions that can carry life-long implications,” Henderson said. “Financial professionals can help this group create a holistic plan for addressing factors like Social Security, health care, long-term care, taxes and income in retirement.”

Related: Delayed: 25% of pre-retirees push back retirement, 15% unsure if they’ll ever retire

The Advisor Authority gives a number of important insights into how professional financial advisors are responding to the current challenges their pre-retiree clients face. In regards to Social Security, 32% of advisors said they were recommending that their pre-retiree clients delay taking benefits to get maximum payment in retirement, up from 28% five months ago. Many advisors are also changing up market plans for their clients:  61% said they were adopting annuities and strategies to protect pre-retiree clients against risk, up from 55% five months ago. Annuities (79%) and diversification/non-correlated assets (77%) were the two most popular risk aversion strategies.

Of course, when it comes to preparing for retirement, there’s no replacement for good old fashioned frugality: 41% of pre-retiree respondents said they’d be avoiding unnecessary purchases over the next 12 months to save for retirement.