Ongoing economic challenges are changing how Americans are thinking about retirement planning, with nearly 6 in 10 pre-retirees (57%) believing that inflation poses the most immediate challenge to their retirement portfolios over the next 12 months.

And this stress apparently is shifting the perception of life as a retiree, especially for those closest to retirement age. Findings from Nationwide’s ninth annual Advisor Authority survey show that roughly 7 in 10 pre-retiree investors (69%)—defined as non-retired investors aged 55-65—agree that the norm of retiring at 65 doesn’t apply to them.

The survey looked at how these investors’ view of retirement has changed and how they and their financial professionals have responded with changes to their retirement financial plans.

Consequently, 4 in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals. What’s more, pre-retirees said their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.

“Many of us watched our parents and grandparents enjoy a smooth transition to a secure retirement powered by traditional pension benefits,” said Eric Henderson, President of Nationwide Annuity. “Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement.”

Financial Habits and Expectations

As a result of these inflation concerns, pre-retiree investors—more than other cohorts—are adjusting their spending and savings habits. In this case, more than 4 in 10 (42%) agree that managing day-to-day expenses is getting more difficult due to the cost of living and nearly 3 in 10 (27%) indicate they are saving less for retirement because of inflation.

Additionally, more than 4 in 10 (41%) pre-retiree investors are avoiding unnecessary expenses (such as vacations, jewelry and shopping sprees) over the next 12 months in order to save more for retirement, compared to 34% of non-retired investors.

In contrast to previous generations, trust in traditional financial and retirement safeguards, such as Social Security, has waned, Nationwide further notes.

Not surprisingly, a lack of confidence in the viability of Social Security upon retirement (38%) is a significant factor influencing pre-retirees to rethink or redefine their retirement planning strategies. Over two-fifths (43%) are not counting on Social Security benefits as much as previously expected, and more than a quarter (27%) expect to receive less in benefits than previously anticipated, the findings show.

Near-Retirement Strategies

Meanwhile, with difficult financial choices ahead for those nearing retirement, advisors are busy guiding clients toward post-career financial security. According to Nationwide’s findings, pre-retiree investors are talking with their advisors about: accumulating sufficient savings to enter or stay in retirement (49%), tax planning strategies (38%) and converting accumulated savings into retirement income (33%).

They also report counseling their pre-retiree clients on when to claim Social Security benefits (28%), taxes and tax planning (23%), and planning for healthcare costs in retirement (21%). Additionally, advisors are recommending their pre-retiree clients delay taking Social Security benefits (32%) to ensure maximum payment benefits in retirement, an increase from five months ago (28%).

Advisors have also amped up their efforts to incorporate strategies to protect pre-retiree clients against market risk. In this case, more than 6 in 10 (61%) advisors are adopting strategies or annuities to do so, compared to 55% just five months ago. Annuities (79%) and diversification/non-correlated assets (77%) rank as the most popular solutions used to help clients protect their assets against market risks, the findings show.

The research was conducted online within the U.S. by The Harris Poll on behalf of Nationwide from Jan. 8-23, 2024, among 518 advisors/financial professionals and 2,346 adult investors with $10,000 or more in investable assets. Investors included a subset of 391 “pre-retirees” age 55-65 who are not retired.

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