Retiree confidence in having enough money to live comfortably throughout retirement dropped significantly in the 2023 Retirement Confidence Survey, conducted by the Employee Benefit Research Institute and Greenwald Research. The survey recorded its biggest decline since the global financial crisis of 2008.
Craig Copeland, director of wealth benefits research for EBRI, explains.
Why the big drop?
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Inflation has had the biggest impact. Among retirees, 42% said the high cost of living contributed to their loss of confidence and 25% cited a lack of savings. And the two are related.
What’s the connection?
When things cost more, that leaves less for savings. Nearly 60% of retirees report that their retirement account balances decreased over the past 12 months, and two-thirds worry that the increasing cost of living will make it harder for them to save money.
In addition, 58% are concerned they will have to make substantial cuts to their spending. The poor performance of the stock and bond markets also had an impact on retirement balances.
Your survey found that retirees are still confident they know how much to withdraw from their retirement savings.
Once retirees in their seventies are required to take minimum distributions from their accounts, they tend to default to that as their benchmark number. Before that age, there’s a large variance in how much they withdraw, depending on how much they need.
Half of retirees say their goal is to maintain their asset levels, and fewer respondents than last year aim to grow their assets. What’s happening?
For quite a while before the COVID-19 pandemic, people could take their required minimum distributions and still increase their remaining balances because of the double-digit returns in the stock market. That wasn’t the case over the past year. We’ll have to see if it becomes a trend.
At the same time, two-thirds of retirees say their financial priority in retirement is to have income stability rather than maintain wealth. Any advice?
Now that interest rates have risen, money market investments are more attractive. But over the long term, stable-value funds have outperformed money market funds. Setting up a ladder of bonds that mature at different times is another option.
Are annuity products still a tough sell?
We see a little uptick in interest, but nothing significant. Many people don’t understand annuities, or they don’t want to give up the flexibility of having access to their money. They’re afraid they will die before they get their money out.
Do you foresee more options to help provide retirees with a steady stream of income?
We’ll see more plan operators offering systematic withdrawals. That’s more work for administrators, and it didn’t make sense when retirement account balances were small. But now that you have six-figure accounts, you have more assets to cover your costs, and it makes sense for employers to encourage people to stay in the plan.
How do retirees feel about Social Security and Medicare?
Most retirees who are receiving Social Security feel comfortable that they will continue getting benefits.
But Medicare is a different story. Medicare’s financing problems are more immediate, and people are concerned that they will be seeing higher deductibles and co-pays and that the number of available doctors may change.
Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance, in 2023. Subscribe to help you make more money and keep more of the money you make here.
Related Content
-
How Prepaid Verizon Phone Service Works and When It's a Smart ChoiceExplore the differences between Verizon Prepaid and Verizon Postpaid plans—costs, perks, flexibility, and when going prepaid makes sense.
-
Try This One-Minute Test to Uncover Hidden Health RisksFinding out this little-known fact about your body could reveal your risk of heart disease and more. It's a simple, free check for healthy aging.
-
Child-Free Cruises Perfect For Your Retirement CelebrationHow to find a bespoke ocean or river vacation for adults. Many of these options are smaller, charming river cruises, expeditions, or niche experiences.
-
Eight Factors to Consider When Considering a Roth ConversionRoth conversions, which transform traditional IRAs into Roth IRAs, are a powerful retirement and tax tool. Here are eight facts to get you started.
-
What to Do About These Three Medicare Changes During Open EnrollmentWith costs due to rise sharply next year, look for coverage that protects your wallet as well as your health.
-
This Is How Much You'll Have to Pay to Share Streaming ServicesIt now costs more to share streaming services with family members who don't live with the account holder. Here's what Netflix, Amazon, Hulu and Disney+ charge.
-
Credit Cards That Actually Reward Your LoyaltyIf you have bank or investment accounts with your credit card issuer, you may qualify for extra cash back, waived fees and other benefits.
-
I Wrote About Credit Cards for Years: Here's My Credit Card Rewards StrategyThis is how I maximize cash back and points for various purchases and leverage premium card benefits such as airport lounge access and annual fee waivers for active-duty military members.
-
Don't Make These 'Buy Now, Pay Later' MistakesDon't Make These 'Buy Now, Pay Later' Mistakes
-
6 Steps to Protect Your Retirement SavingsDon't let a shaky economy and volatile market derail your retirement. These moves will help ensure your money lasts as long as you do.
