Inflation Spurs Rethink of Retirement Savings Strategy, Survey Shows

Key Takeaways

  • A new survey shows that inflation is causing 60% of retirement savers to rethink their strategy, with 75% saying they need to save more than originally thought.
  • For 63% of American workers, retirement will mean changing jobs or working fewer hours, not ending work entirely, according to the 2023 Global Retirement Survey from MFS Investment Management.
  • Two-thirds of those surveyed are not confident they will be able to retire when they want, while a third don’t believe they will be able to retire at all.

Inflation is creating more worries for retirement savers, with many now changing how they are saving and investing to meet those goals, a new survey shows.

Persistently higher prices from inflation is leading 60% of retirement plan participants to think differently about retirement, according to the 2023 Global Retirement Survey from MFS Investment Management. Three-in-four said they now need to save more for retirement than they originally thought, while two-thirds are not confident they can retire at the age they want, and nearly a third now believe that they will not be able to retire at all,  the survey found.

“The uncertainties and disruptions over the past few years have clearly affected workplace savers, who are now less sure about when retirement will come, what it will look like and how they should prepare for it,” says Jeri Savage, retirement lead strategist, at MFS. 

The survey results come as inflation has cooled from the highs of last summer, when prices grew at an annual rate higher than 9%, but remain persistently high. The September Consumer Price Index showed a 3.7% annual inflation rate, well above the Federal Reserve’s target of 2% inflation.

The inflationary environment is prompting Americans to change their investment strategies, the survey showed, with 61% adopting a more conservative strategy in response to inflation, a higher percentage than in Canada, Australia or the U.K. It also found that 63% of Americans now view retirement not as the end of work entirely, just a transition around reduced hours or potentially a different job. 

Retirement Savers Misusing Target-Date Funds 

Many investors are misusing target-date funds (TDF), which are designed to maximize returns for a specified date by changing its investment strategy over time. The survey showed that while 56% of plan holders invest in a TDF, only a third under 45 and only 19% of older workers hold a single TDF, which is how these funds were designed to be used.

When it comes to questions on their retirement plans, many workers are looking for help from their companies, with 53% saying they have found, or would expect to find, a financial advisor through their employer. If offered, 70% said they would use that resource.

Retirement investors are also finding advice in different places, with 45% meeting an advisor either in person, or through video, while 20% have used online tools and another 9% have turned to robo-advisors. 

The survey was conducted online, with responses from 1,000 defined contribution plan participants in the U.S. and another 3,000 in the U.K., Canada and Australia over the period of March 22 to April 6, 2023.

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