One of the best resources for “real-time updates” on how retirees are settling into retirement is the Retirement Confidence Survey, which has been conducted for the past 33 years by the Employee Benefit Research Institute.1
We keep close tabs on the survey so we can better anticipate what challenges may lie ahead for some of our clients. We were particularly interested in the 2023 survey because it would reflect how current and future retirees are managing through recond-setting inflation and the difficult stock and bond market of 2022.
“… You have plenty of good things laid up for many years. Take life easy; eat, drink, and be merry… You fool! This very night your life will be demanded… This is how it will be with anyone who stores up things for himself but is not rich toward God.” Luke 12: 19, 20, 21
Here were the most compelling findings from the 2023 survey.
Inflation is in focus: Both workers and retirees were concerned that the higher cost of living will make it hard for them to save money. Some were worried that their money would not be able to keep up with higher costs, and more were concerned that they might need to make lifestyle changes due to inflation.
From our perspective, inflation appeared to peak in June 2022, when consumer prices rose 9.1 percent from a year earlier. Inflation has been trending lower in 2023, which is encouraging. But we understand that people experience inflation in different ways, so if you have a particular concern, we welcome the chance to speak with you.2
Help with retirement plans: Only 30% of workers are confident they can select appropriate investments from their workplace retirement plans. More concerning, 40% turn to family and friends when looking for information about workplace retirement choices.
We believe it’s critical that your workplace retirement plan compliments the other preparations you are making for retirement. Having all your accounts work together is critical as you pursue your retirement goals. If your workplace plan introduces a new investment choice, or if there is something you don’t understand, please let us know. We may be able to help.
Overconfidence: Almost 70% of tomorrow’s retirees and current retirees say they are confident making decisions about withdrawals. That’s good to hear. But what’s concerning is they have vastly different expectations about the role the income sources will place in retirement. For example, retirees talk about the importance of Social Security, but workers say they are less likely to think it will be a key source of income.
Looking for Guidance
Roughly 26% of today’s workers and 35% of retirees look to advice from a financial professional.
Retirement Confidence Survey, EBRI.com, 2023
(Within the graph listed above, it is comparing the percent of workers to retirees with different ways they receive financial information. A personal, professional financial adviser: worker, 26%, retirees 35%. Family and friends: workers, 19%, retirees, 12%. Online resources and research you do on your own: workers and retirees, 14%. Representatives from your workplace retirement plan provider: workers, 8%, retirees, 5%. Your employer/work info: workers, 6%, retirees, 2%. Online advice or advisers that provide guidance based on formulas: workers, 5%, retirees, 2%. Financial experts or gurus in the media: workers, 4%, retirees, 1%. Other: workers, 5%, retirees, 4%. None of these: workers, 14%, retirees, 24%.)
Understanding the role each of your income sources will play in retirement is critical when developing
a distribution strategy. Not overlooking one source—or expecting too much from another source—is
key. When we create a strategy, we take a broad look at all of your accounts and create illustrations
that help you better understand how they will all work together.
The Retirement Confidence Survey allows 2,500 of tomorrow’s retirees and current retirees to give us
a glimpse into their expectations and experiences with inflation. We look forward to the report so we
can better understand what’s on the mind of retirement-focused people
1. EBRI.org, April 27, 2023
2. BLS.gov, May 9, 2023