(Nationwide) - Today, four in 10 older American workers are delaying their retirement due to the rise in living costs – double those who said they delayed their retirement a year ago because of the COVID-19 pandemic.
The survey, released today by the Nationwide Retirement Institute, finds wide-ranging workforce consequences because of delayed retirement.
In large numbers, companies are reporting ripple effects on their employees, especially younger workers. More than one-third of private-sector employers (36%) indicate that delayed retirements impact their ability to hire new talent and 34% say it impacts their ability to promote young talent. Roughly the same percentage (35%) say it makes their health and benefits plans more expensive.
Employers also report that delayed retirements currently impact the wellbeing of their employees:
- Three in 10 employers report lower team morale
- Nearly the same amount (29%) report that it has negatively impacted employees’ mental health
- 27% have noticed lower workforce productivity
- 22% say that it has negatively impacted the physical health of employees
“We’re watching delayed retirements impact employers’ entire talent lifecycle, and it may be unintentionally contributing to ‘quiet quitting,’” said Amelia Dunlap, vice president of Nationwide Retirement Solutions marketing. “Employers may find themselves with a workforce that lacks motivation to go above and beyond without the ability to reward employees for a job well done. Employers should look for opportunities to better support their older workforce as they near retirement.”
With financial pressures mounting, employees are worried about their long-term security
Employees are losing confidence in their retirement security amid a challenging economic environment. Roughly one in four American workers (24%) feel they are on the wrong track for retirement and fewer than six in 10 employees have a positive outlook on their retirement plan and financial investments – a significant drop from 2021 (58% vs. 72% in 2021). Two in three (66%) employees cite inflation as a top retirement concern (vs. 53% 2021).
While top financial goals for employees include covering retirement living expenses and having predictable retirement income, younger workers aged 35-44 report in higher numbers than those 45+ that they feel confused (21%) or panicked (16%) about their retirement plans and financial investments.
When analyzed across the public and private sectors, the study reveals that government employees are much more optimistic than private sector employees about their retirement security. Only 28% of government employees are expecting to delay their retirement because of inflation vs. 41% in the private sector. Three-fourths (75%) of government employees say they are on the right track when it comes to being financially prepared for retirement vs. 56% of those in the private sector.
“Employers must invest now in solutions and benefits that help their employees enhance their financial security and give them greater confidence that they can retire ‘on time’,” added Dunlap. “The private sector has an opportunity to invest in solutions that are already enjoyed by the public sector, such as in-plan guaranteed lifetime income solutions. Like pensions, they offer a steady stream of predictable income for life.”
Interest grows for guaranteed lifetime income investment options
The study finds that more than half of employees are interested in guaranteed lifetime income investment options included as part of a target-date fund, an 11-point increase since 2021 (53% vs. 42% 2021). Nearly half (48%) report they are interested in contributing to these investment options as part of a managed account. More than four in 10 employees (41%) would likely roll over retirement savings into a guaranteed lifetime income investment option if they were able to – a 6-point increase since 2021.
Similarly, most employers report high levels of favorability (75% private sector and 86% government), interest (69% private sector and 70% government), and comfort (64% private sector and 73% government) with the addition of guaranteed lifetime income investment options within employer-sponsored retirement plans.
However, a lack of access and familiarity is holding back employees from contributing to these investment options. Only about a fifth (21%) of employees are familiar with guaranteed lifetime income investment options. When asked about barriers to not contributing to one, both employees (42%) and plan sponsors (38% private sector, 32% government) cite a lack of knowledge as the top barrier.
“Our research shows that employers and employees alike are starting to realize that guaranteed lifetime income offers unique confidence that workers are protected against inflation and market volatility and that individuals won’t outlive their savings,” said Dunlap. “Employers should work with their retirement plan advisor or consultant to help find the right investment solutions to set up their workforce for long-term financial success and the growth of the next generation of talent.”
Nationwide’s guaranteed lifetime income solutions (PDF) offer plan participants guaranteed income for life and protection against market volatility. Nationwide also offers educational resources for financial professionals, advisors and consultants. Plan sponsors – please contact your Nationwide representative.
For more information on the findings of this survey, view this infographic (PDF) or complete survey results (PDF) .
Methodology
Edelman Data and Intelligence (DxI) conducted an online survey on behalf of Nationwide from July 14 – August 5, 2022. Respondents included:
- 500 Company Plan Sponsors/Benefits Decision Makers. Business executives, business owners, human resources professionals, and financial management professionals who are full-time workers at U.S. businesses with at least 10 full-time employees. They must also be decision-makers for company retirement plans including 401(k), 403(b), or 457(b) plans)
- 100 Public Sector Plan Sponsors/Benefits Decision Makers. Full-time employees of a public sector entity (federal, state, local govt) that offers a defined contribution retirement plan to its employees. Must have some level of decision making regarding these plans. Can include HR, financial management professionals or government executives/senior managers with decision making authority.
- 1,000 Plan Participants (45+). 45+ years of age, full-time worker, who has access to 401(k), 403(b), 457(b) or a government defined contribution plan at their work. Sample included a minimum 100 government plan participants.
- 100 Plan Participants (35-44). 35-44 years of age, full-time worker, who has access to 401(k), 403(b), 457(b) or a government defined contribution plan at their work.
This material is not a recommendation to buy or sell a financial product or to adopt an investment strategy. Investors should discuss their specific situation with their financial professional.
This information is general in nature and is not intended to be tax, legal, accounting or other professional advice. The information provided is based on current laws, which are subject to change at any time, and has not been endorsed by any government agency.
Nationwide and Edelman Data and Intelligence are separate and non-affiliated companies.
Nationwide Investment Services Corporation (NISC), member FINRA, Columbus, OH. Nationwide Retirement Institute is a division of NISC.
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September 28, 2022
