Workers Worried About Inflation Are Delaying Retirement

Workers are delaying retirement because of inflation, which is affecting employers’ ability to hire new workers and promote personnel, according to a new report from Nationwide Retirement Institute.

The 2022 Nationwide In-Plan Lifetime Income Survey found that 40% of workers age 45 and older are delaying their retirement because of rising living costs—double those who said they delayed retirement last year because of the COVID-19 pandemic.

“We’re watching delayed retirements impact employers’ entire talent lifecycle, and it may be unintentionally contributing to ‘quiet quitting,’” Amelia Dunlap, vice president of Nationwide Retirement Solutions marketing, said in a press release.

Nationwide Institute data show that 36% of private-sector employers say workers’ delayed retirements have affected their ability to hire new talent. In addition, 34% said delayed retirements have affected promoting young workers and 35% said they have made their health benefits plans more expensive. Nationwide also found that employers are reporting effects to the well-being of their employees because of delayed retirements.

Data show that among employers, 30% reported lower team morale, 29% reported negative effects on employees’ mental health, 27% have noticed lower workforce productivity and 22% reported negative effects on the physical health of employees.

“Employers may find themselves with a workforce that lacks motivation to go above and beyond without the ability to reward employees for a job well done,” Dunlap added. “Employers should look for opportunities to better support their older workforce as they near retirement.”

The study also found that 24% of all workers feel they are on the wrong track for retirement, an increase of 10 percentage points compared to 2021, while 58% of workers have a positive outlook on their retirement plan and financial investments, compared with 72% one year ago.

Additionally, the Nationwide Retirement Institute found that 66% of employees cited inflation as a top retirement concern, versus 53% in 2021.  

An analysis across the public and private sectors shows that government employees are more optimistic than private-sector employees are about their retirement security: 28% of government employees are expecting to delay their retirement because of inflation, compared with 41% of private-sector workers, according to Nationwide data.

Accordingly, 75% of government workers said they are on the right track with regard to preparing financially for retirement, versus 56% of private-sector employees.

“Employers must invest now in solutions and benefits that help their employees enhance their financial security and give them greater confidence that they can retire ‘on time,’” Dunlap said. “The private sector has an opportunity to invest in solutions that are already enjoyed by the public sector, such as in-plan guaranteed lifetime income solutions. Like pensions, they offer a steady stream of predictable income for life.”

The Nationwide report does show growing interest from workers in lifetime income investment options.

According to the data, 53% of all employees age 45 and older are interested in guaranteed lifetime income investment options included as part of a target-date fund, compared with 42% in 2021; 48% reported they are interested in contributing to such investment options as part of a managed account; and 41% would likely roll over retirement savings into a guaranteed lifetime income investment option if they had the option—a six-point increase from last year.

“Our research shows that employers and employees alike are starting to realize that guaranteed lifetime income offers unique confidence that workers are protected against inflation and market volatility and that individuals won’t outlive their savings,” Dunlap said. “Employers should work with their retirement plan adviser or consultant to help find the right investment solutions to set up their workforce for long-term financial success and the growth of the next generation of talent.”

The report was conducted by Edelman Data and Intelligence in an online survey on behalf of Nationwide from July 14 to August 5. The respondents included 500 corporate plan sponsors, 100 public-sector plan sponsors, 1,000 plan participants age 45 and above with access to a 401(k), 403(b), 457(b) or other tax-preferred defined contribution plan at work and 100 plan participants age 35 to 44 with access to a 401(k), 403(b), 457(b) or other preferred defined contribution plan at work.