Retirement is delayed, altered or cancelled for nearly half of Americans: Nationwide

A recent survey from Nationwide reveals how disruptive recent years have been for investors and the impact that that has had on their retirement plans.

Nationwide’s ninth annual Advisor Authority survey, which is powered by the Nationwide Retirement Institute, found that 61% of investors say that their retirement expectations have changed significantly in the past five years. In addition, almost half of investors said that their plans for retirement have been delayed, altered or canceled because of economic conditions during that time period. The uncertainty extends to retirement savings targets as only 38% of investors indicated that they currently have a retirement savings goal.

Of those with a goal, it tends to be a high one: 42% of investors think they will need between $1 million and $2 million to retire, and 18% believe they will need more than $2 million.

“Americans believe they will need over $1 million to retire comfortably – a figure that could be discouraging for even the most committed retirement savers,” said Rona Guymon, senior vice president of Nationwide Annuity Distribution, in a press release. “What’s important to remember is that everyone’s ‘magic number’ in retirement will vary depending on a number of variables including spending habits, health, debt levels, location and more. It’s good to have a goal in mind, but holistic financial planning with an advisor is more likely to lead to a comfortable retirement. At the end of the day, a magic number doesn’t tell you much about how long your income will last over an uncertain amount of time in retirement. That’s where holistic financial planning can make all the difference in the world to address the anxiety of a nervous investor.”

The survey delved into the most common sources of consternation around retirement for investors. In particular, those investors who are 55 or older or who are already retired said they were most worried about paying for basic living expenses (83%), medication and other health-related items (58%) and supplemental health insurance (39%) in retirement. As a result of their worry about affording the necessities, they have cut their spending in areas such as luxury goods (47%), leisure (44%), entertainment (44%) and vacations/trips (38%).

Fears of a recession are commonplace. That includes 3 in 4 investors in the survey saying they are concerned about a U.S. economic recession in 2024, and 31% of non-retired investors citing a recession as the most immediate challenge to their retirement portfolio over the next 12 months. In addition, 53% of non-retired investors expect interest rates to be raised 12 months from now.

Many of those surveyed expressed feelings that an on-time retirement free from work seems elusive. The evidence is that 27% of non-retired investors believe they would likely have to return to the workplace because of insufficient savings if they retired in the next 12 months, and 19% of that demographic said they were not sure if they would ever retire. Another 19% believe inflation will force them to retire later than planned.

“While it’s understandable that the turbulent markets we’ve seen over the last few years have investors on edge, we no longer expect a recession in 2024 and still predict rate cuts will occur later this year,” said Mark Hackett, chief of investment research at Nationwide Financial. “It’s important for investors to focus on what they can control in today’s economic environment, and one way they can do that is by working with their advisor or financial professional to establish or revisit their long-term plan to ensure it remains aligned with their retirement goals.”

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The Nationwide survey also included responses from financial advisors. Of those, 48% said a rising cost of living has led their clients to rethink their retirement planning strategies, and 34% said their clients have increased the funds they are drawing from their retirement accounts to meet their financial needs. Strikingly, 23% of advisors said they have clients liquidating their assets, and 16% said they have clients moving in with their adult children.

Against that backdrop, advisors have turned to annuities (79%), diversification and non-correlated assets (77%) and liquid alternatives, such as mutual bonds or ETFs (58%), to help clients protect their assets against market risk.

“It’s clear that having a trusted advisor makes a difference when it comes to feeling confident about living comfortably in retirement,” Guymon said. “Advisors and financial professionals should seize this opportunity to engage with their clients to reinforce the importance of sticking to their long-term plan. Another way to address client anxiety around retirement goals is to help them understand the value of protection solutions, like annuities, which can guarantee income in retirement and guard against market volatility.”