Inflation Knocking 61% of Americans’ Retirement Plans

Retirement dreams have been “significantly” curtailed in the past five years for 61% of Americans — with nearly half delaying, altering or cancelling their retirement plans, according to a Nationwide survey. In the face of these headwinds, just 38% think it’s still valuable to have a specific savings target or goal. Among those who do have a figure in mind, 41% think they will need between $1 million and $2 million to retire, while 18% think it will take more than $2 million to comfortably pack it in. “Americans believe they will need over $1 million to retire comfortably, a figure that could be discouraging for even the most committed retirement savers,” says Rona Guymon, senior vice president of Nationwide Annuity Distribution. “What’s important to remember is everyone’s ‘magic number’ in retirement will vary depending on a number of variables — including spending habits, health, debt levels, location and more,” Guymon says. Amid prices that have soared 20% in the past three years — on everything from food, gas, housing, to insurance — it’s no wonder that Americans’ retirement savings targets have shot through the roof. The typical U.S. household was paying $227 more a month in March to purchase the same goods and services as a year prior because of inflation. Over the next 12 months, that will add up to $2,724. Taking cumulative inflation under the Biden administration into account, Americans are paying an average of $784 more a month compared with two years ago, or $9,408 a year. Americans are paying $1,069 more a month for goods and services compared to three years ago. That adds up to $9,408 more a year, compared to 2021 prices. Americans older than 55 or who have retired are most worried about basic living expenses, cited by 83% of the 2,346 investors with investable assets of at least $10,000, who Nationwide polled Jan. 8-23, 2024. Those worries are followed by medication and health-related expenses (58%) and supplemental health insurance in retirement (39%). These fears are causing this 55+ demographic group to forego small pleasures today, with 47% spending less on luxury items, 44% less on both leisure and entertainment, and 38% less on vacations and trips. Seventy-five percent are worried about a U.S. recession in 2024. That jumps to 81% among those 18 to 54. Fifty-three percent of non-retired investors expect interest rates will be higher 12 months from now. Nearly one in five, 19%, of non-retired investors think they will never be able to retire. The same percent thinks inflation will cause them to retire later than they would like, and 27% expect they will be forced out of the workforce earlier than they would like. More than one-third, 34%, of the 518 financial advisers included in the survey say their clients are tapping into their retirement accounts to pay bills; 23% say clients are liquidating assets, and 16% say their clients are moving in with adult children. Forty-seven percent of advisers have clients who are working or are considering returning to work in retirement. “It’s understandable that the turbulent markets we’ve seen over the last few years have investors on edge,” says Mark Hackett, chief of investment research at Nationwide Financial. However, he adds, one way Americans can grapple with these financial fears is to revisit their long-term plans and work with a financial adviser.