Inflation tops financial worries among retirees: Goldman Sachs
About 51% of surveyed retirees reported living on less than half of their pre-retirement annual income
Mendon Capital Advisors president and CIO Anton Schutz discusses the U.S. economy ahead of the September jobs report.
The threat of soaring inflation is leaving many retirees concerned about their finances, according to a survey released Wednesday by Goldman Sachs Asset Management.
The majority of retirees surveyed cited inflation as their greatest concern (71%), followed by future healthcare (51%), potential reductions in future Social Security benefits (46%) and running out of money (44%). Each of those percentages has increased since Goldman's last retirement survey in 2021.
"A clear theme from our findings is retirement income uncertainty," said Mike Moran, Senior Pension Strategist at Goldman Sachs Asset Management. "We believe this uncertainty is changing retiree behavior in hopes of preserving their savings for longer, including a surge in interest for part-time work in retirement and lower overall spending."
About 51% of currently retired respondents reported living on less than 50% of their pre-retirement annual income, including 29% who report living on 40% or less. Only 25% of retirees surveyed generate what many estimate as the amount needed to maintain their standard of living — 70% or more. Among surveyed retirees, 42% are spending less in retirement than anticipated, compared to 31% who are spending what they expected and 22% who are spending more.
About 56% of retirees surveyed reported retiring earlier than planned, with 48% citing the change being due to reasons out of their control.
The top reasons for retiring early included:
- Health issues (23%)
- Being tired of working (13%)
- Losing their job (11%)
- Being offered a retirement package from their employer (11%)
- Hitting the U.S. Social Security age (13%)
- Caring for family (9%)
WHOLESALE INFLATION RISES MORE THAN EXPECTED IN SEPTEMBER, WITH PRICES JUMPING 8.5%
Retirees aren't alone
Retirees aren't the only ones worried about their finances.
According to Goldman, 53% of working Baby Boomers and 51% of Gen X respondents surveyed said they are behind in their retirement savings. Only 11% of working Baby Boomers and 12% of Gen X surveyed were "very confident" in meeting their retirement goals.
In comparison, just 34% of millennials and 27% of Gen Z respondents reported being behind schedule in their retirement savings, and 31% of each group said they were "very confident" they will meet their retirement goals.
Challenges hindering working respondents' retirement savings include:
- Credit card debt
- Paying existing loans
- Saving for college
- Caring for and financially supporting family members
- Time out of the workforce
- Financial hardship
- Too many monthly expenses
Almost four in ten (39%) millennials and 47% of Gen Z increased retirement savings over last year, while 32% of Baby Boomers and 33% of Gen X decreased theirs.
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Tackling uncertainty
Maria Vassalou, Goldman's co-chief investment officer of multi-asset solutions, told reporters during a briefing on Tuesday that a "significant change" is coming in the way assets are managed.
"Generally what we're seeing is that we are in a regime change going forward that's going to complicate investing," she said. "We're going to have to tackle more uncertainty. We need to be much more nimble in our investments, much more dynamic."
According to Goldman Sachs Asset Management, 53% of working Baby Boomers and 51% of Gen X respondents surveyed said they are behind in their retirement savings. In comparison, just 34% of millennials and 27% of Gen Z respondents reported being behind … (iStock / iStock)
Vassalou recommended that workers start saving for retirement as early as possible and make sure their retirement plan is well diversified within different asset classes. She also touted the benefit of using professional financial help to navigate the rapidly-changing economic environment.
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Top three challenges
Almost all respondents (95%) surveyed by Goldman considered financial help important to successfully managing their retirement savings. The top three challenges respondents seek advice for are
- Generating income (34%)
- Understanding how long their savings will last (32%)
- Understanding if savings are on track and, if not, how to adjust (29%).
Among surveyed retirees, 46% prefer working with a financial advisor, while 27% prefer digital advice and 27% prefer a combination of both. As for current workers surveyed, employer-provided defined contribution retirement plans were the top source of education and advice (32%), followed by financial advisors (31%) and family members (30%).
Goldman's survey collected responses from 1,566 individuals in the U.S. between July and August. Participants included 967 working individuals across generations and 599 retired individuals aged 50-75.