“Are we there yet?” Workers worried about reaching their retirement goals

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A quarter of Americans are less confident about reaching their retirement goals than they were before the pandemic hit two years ago. Additionally, nearly three-quarters worry about the impact of inflation on retirement readiness, and nearly a third don’t know how to ensure their retirement savings keep pace.

“With so much uncertainty in the world, people understandably have concerns on a variety of fronts, and ‘Are we there yet? must be on the minds of many,” said Rita Assaf, vice president of retirement at Fidelity Investments.

“The good news is that while the pandemic has impacted us in many ways, from a financial perspective, our research shows that having a plan in place is a solid way to help you cope any storm.”

Optimism, be-fi, robo-advisors

Despite the concerns, investors seem increasingly optimistic, according to Fidelity’s 2022 State of Retirement Planning Study. The majority of Americans have put in place good financial behaviors and set practical priorities for themselves after the pandemic. A growing sign of the times is the emerging use of robo-advisors to help with retirement decisions, especially among younger investors. In fact, 61% of the next generation of investors say they enjoy using a robo-advisor to help them navigate their next steps, compared to 35% of the general population.

No need to save for retirement?

In addition to these positive changes, however, several actions – or inactions – have taken place, often out of necessity, during the pandemic and the resulting Great Resignation that may require some course correction. Fifty-five percent of the next generation say they have put their retirement planning on hold during the pandemic, which is much higher than the general population (41 percent). Nearly half of young investors don’t see the point of saving for retirement until things get back to normal.

Disturbing Generation X

Inertia is not just a problem for young people. When it comes to Gen Xers, the outlook on the state of their retirement savings is by far the bleakest among those who say their retirement plans have been negatively affected by the pandemic.

More than a quarter believe they are four or five years away from getting back on track or admit they are completely on track. This is a worrying prospect, as the oldest members of Generation X are now five years away from reaching the qualifying retirement age of 62. Many Gen Xers have fallen behind in other areas as well.

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Dipping too quickly into a retirement nest egg that has taken decades to prepare can also be a cause for concern. One in five respondents believed that a financial professional would recommend a withdrawal rate of 10-15% from retirement savings each year.

In fact, withdrawing this amount would be well above Fidelity’s suggestion of withdrawing no more than 4-5% of savings per year and could lead to savings being depleted far too quickly. An immediate concern, this view was shared by 20% of Gen Xers and 15% of Baby Boomers.

Planning power

Investors with a plan in place fared better than those without. The power of planning can have a profound impact on peace of mind, as well as retirement confidence, both short and long term. Those with a plan in place:

  • Feel more confident to be able to retire when and how they want (91% with a plan versus 67% without); are more likely to know how much money they will need to retire (84% with a plan versus 56% without a plan); and when they want to retire (84% with a plan versus 59% without).
  • Are more likely to say they know what to do to keep up with inflation (77% with a plan vs. 57% without) and are less likely to say they plan to retire later because of the pandemic (16% with a plan vs. 29% without).

“For those who put their retirement plans on hold during the pandemic, now may be the perfect time to get back into action,” the survey report concluded. “Here’s a powerful reason: it can help you feel better. In fact, when looking at major financial milestones, planning for retirement is the one area where people tend to be more motivated by planning rather than excited for the day it will happen.

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