More than two-fifths of pre-retirees (42%) plan to delay, revise or cancel their retirement plans because of economic conditions experienced during the last five years, according to a new Advisor Authority study by Nationwide.
More than half (51%) of pre-retirees age 55 to 65 say the biggest long-term challenge to their retirement portfolio is the increased cost of living, along with inflation, according to the study, which was powered by the Nationwide Retirement Institute.
Among survey respondents, 15% say they will retire later than planned because of inflation, according to a news release from Nationwide.
One fifth (20%) say their top financial priority over the next 12 months is saving enough for retirement. To conserve their savings, 35% of pre-retiree investors plan to work in retirement, while 27% will delay their retirement. Both of those approaches differ significantly from that of previous generations, according to the release.
“Many pre-retiree investors saw their parents and grandparents retire with the confidence that came from having traditional pension benefits – benefits that are much less common today,” Nationwide Annuity President Craig Hawley said in the release. “It’s not surprising that pre-retiree investors are questioning whether their dream retirement is even possible as they grapple with lingering inflation, market volatility and concerns about running out of money in retirement.”
Hawley said that as a result of this, many pre-retirees are abandoning the conventional retirement strategies of previous generations. Pre-retirees should seek the help of financial professionals to build a plan for retirement rather than try to figure it out themselves, he said.
Not Your Grandfather’s Retirement
Almost six in 10 (59%) pre-retiree investors say they have significantly altered their expectations for retirement in the last five years. Many say they don’t have faith in traditional retirement norms and strategies because of the current economic environment. Among the truisms coming in questions:
The 4% Rule: Over one-third of pre-retirees (35%) say the 4% Rule (withdrawing 4% of your retirement portfolio annually to make it last through retirement) is no longer relevant, and 13% are discarding the 4% Rule altogether.
100 Minus Age: 53% say the “100 Minus Your Age in Stocks” rule (deciding the portion of your portfolio dedicated to stocks based on your age) is no longer relevant.
Magic Number: More than half (52%) are abandoning a “target” retirement age or savings goal.
Retiring at 65: Almost two thirds (64%) say the norm of retiring at age 65 doesn’t apply to people like them. That’s up from 59% in 2024.
Advisors Still Follow the Rules
More pre-retirees are turning to financial professionals, according to the study. Currently, 40% of pre-retirees work with a financial advisor, and 28% started working with their advisor in the past year.
Despite the skepticism of many pre-retirees, financial advisors still subscribe to the traditional retirement rules of thumb, with 84% finding the 4% Rule relevant, and 73% backing the “100 Minus Your Age in Stocks” Rule.
“Our survey data shows a disconnect between pre-retiree investors and advisors when it comes to traditional retirement strategies – a gap that may be driven by the fact that more than half of pre-retiree investors are not currently working with an advisor and may not understand how these tried-and-true rules of thumb can benefit them,” Hawley said. “While traditional retirement rules are not going to be for everyone, working with a trusted advisor can help pre-retirees determine which ones, if any, are right for them.”
Macroeconomic factors are cited by financial professionals as the main obstacles to their clients’ retirement planning strategies. Almost half (46%) of advisors say inflation caused pre-retiree clients to redefine or rethink their retirement planning strategies, while 45% cite the rising cost of living and 37% reference the fear of running out of money in retirement.
Over four in 10 (42%) of advisors report that pre-retiree clients plan to “phase” their retirements. That includes working six months, then taking off six months, or working fewer hours.
For more information on the survey findings, go here.
Nationwide commissioned The Harris Poll to conduct the online survey, which queried 610 advisors and financial professionals and 2,524 investors ages 18 and older with investable assets of at least $10,000.
