Economy, inflation delaying retirement dreams: John Hancock

A new study shows a worrying spike in the number of workers who think they'll need to delay their retirement due to a potential economic downturn.

According to the results of John Hancock Retirement’s ninth annual stress, finances and well-being report, 38% of employees believe they will have to retire later than they expected, a notable increase from the 24% who said that in last year’s report. The decline in both stocks and bonds in 2022, along with the spike in inflation, also caused 70% of respondents to say they worried “a great deal” about the economy.  

The study also showed employees are now more than twice as likely to describe their personal finances as “fair or poor” (42%) as they are to call them “good or excellent” (20%).

Continuing with the negative economic tone, one in three respondents say it’s currently “challenging” for them to save money, and one in five have dipped into their savings to be able to afford day-to-day necessities. 

“Coming out of the pandemic, we were hopeful to see continued improvements in financial well-being, but our results showed how quickly an uncertain economy can take those gains away,” Aimee DeCamillo, head of global retirement at John Hancock Retirement parent Manulife Investment Management, said in a statement.

“We did see some resilience however — despite their financial strain, more than 70% of respondents said they’ll be focused on growing, maintaining or investing their savings in the coming months with almost half citing paying off debt and planning for retirement as short-term goals,” DeCamillo said.

TJ Arcuri, retirement plan consultant at SageView Advisory Group, says he's been hearing similar concerns from clients, especially from those who hadn't reviewed their retirement strategy for some time.  

“It has presented an opportunity to talk to clients about their overall strategy and risk tolerance and remind them that the investment strategy is still long term in nature through retirement, typically 20 to 30 years," Arcuri said. "So while this last year was troubling, we’re relying on long term capital market assumptions to redirect clients from a tactical reaction to a strategic plan.”

David Hsieh, managing director at Beacon Wealth Advisory at Stifel Independent Advisors, said the volatile market and spike in inflation aren't the only culprits leading to more households considering a delay in retirement. He also saw a significant spike in 401(k) hardship withdrawals and individuals taking loans against their 401(k) plans during the pandemic, which ended up compounding the dilemma of when to retire.

“A misstep navigating these waters could significantly shorten or delay retirement," Hsieh said. "This makes working with a financial advisor to develop an investment plan even more critical to producing clarity about one’s financial future.”

Elsewhere, the study showed that engagement helps lower employee stress over finances. For example, workers who engage with their retirement plans digitally proved more likely to be on track for retirement than their less engaged peers, according to the study. Moreover, the study’s respondents say that financial wellness programs reduce financial stress (82%) and make them more likely to stay with their employer (78%).

That said, despite the reported benefits, only three in 10 say their employer offers a wellness program, while two in five (41%) are unsure. The study also showed 67% percent of employees are interested in receiving financial planning resources from their employer and 20% would like mental health resources.

“While offering financial wellness tools with an engaging, personalized communication plan is something positive employers can do for their bottom line, we like to emphasize that it also can be a significantly positive thing to do for their employees,” DeCamillo added.