Economic uncertainty forcing more pre-retirees to delay retirement, study says

The majority of pre-retirees highlighted inflation as the greatest challenge to their retirement plans over the coming 12 months, followed by an economic recession, market volatility and taxes.

Forget the cigar — how about close, but no retirement?

According to the Advisor Authority survey Nationwide released this week, a quarter of pre-retirees, defined as non-retired investors aged 55 to 65, are pushing back retirement, while another 15% aren’t sure if they will ever retire.

The majority (60%) of pre-retirees highlighted inflation as the greatest immediate challenge to their retirement plans over the coming 12 months, followed by an economic recession (46%), market volatility (36%) and taxes (23%).

“Because the trajectory of the markets and the economy looks uncertain in the short term, an advisor can help investors who are nearing retirement age remain calm, nimble and informed when it comes to adjusting their plans,” Eric Henderson, president of Nationwide Annuity, said in a statement.

Not bolstering pre-retirees’ confidence in their ability to wave goodbye to the workplace is the solidity of Social Security. According to the report, over half (53%) of respondents are concerned about the long-term viability of Social Security, with more than one in four (26%) pre-retirees believing the program will run out of funds in their lifetime.

Based on the 2023 Old Age, Survivors, and Disability Insurance Program’s Trustees report, those fears aren’t unwarranted. The report said 23% of scheduled benefit payments for recipients could be depleted as soon as 2033.

As a result of pre-retirees’ increased economic anxiety, the study shows they are choosing to manage their investments more conservatively (30%) going forward. For example, nearly one in five (19%) plan to contribute more to their 401(k) or employer-sponsored defined-contribution plan each month. On the other hand, the study shows just 10% are planning to manage their investments more aggressively.

Heightened economic uncertainty and recession fears also have those nearing retirement increasingly turning to financial professionals for guidance. The report showed that of the 49% of pre-retirees who currently have an advisor or financial professional, 40% began working with one over the last 12 months.

On the positive side, one-third (30%) of pre-retirees who work with an advisor do so to feel more confident about their financial future, according to the report, and 88% of pre-retiree investors say having a plan for their retirement helps them feel more in control of their financial future.

“Advisors recognize investors’ desire to make the right moves as they near retirement,” Henderson said. “They can start driving positive conversations with these clients by understanding their retirement goals, helping them predict and plan for fixed expenses, and determining the right time to claim Social Security.”

Nick Faller, wealth advisor at SageView Advisory Group, said the current economic environment is causing more of his pre-retiree clients than ever to wonder if they’ll be able to retire as they originally planned.

“This is why having a financial plan is so crucial to help build the work-optional lifestyle many of us seek,” Faller said. “Investments are important but are simply a piece of the puzzle. Managing risk as well as planning for the short, mid and the long term can help us achieve our goals with a higher probability.”