Advisors know that 2022 delivered setbacks for clients’ retirement planning and savings. However, the conversation doesn’t begin and end with the fact that stocks and bonds faltered in unison. Nor does the Federal Reserve’s 2022 rate hike campaign tell the complete story of retirement wreckage, though it was a significant contributing factor.
There’s much more to the story and advisors need to be aware of that fact. A solid starting point for insight regarding top priorities for retirement-minded clients is the recently released 2023 Retirement Confidence Survey, courtesy of the Employee Benefits Research Institute (EBRI).
One of the takeaways, and it’s one advisors should note, is the point that while was a trying year in financial markets, many investors stayed the course. That included maintain contributions to employer-sponsored retirement plans.
That’s good news for advisors because it shows clients are engaged, committed to long-term investing and take seriously retirement planning.
Confidence, Income, Inflation
Due to soaring inflation, interest rates rose in a big way last year, damaging investors’ confidence as fixed income instruments faltered. In other words, clients still desire income, but they could use a shot of confidence regarding income-generating assets as well as the longer-term inflation outlook.
“These concerns are understandable. Higher interest rates and tightening financial conditions (including labor shortages which, ironically, are partly due to retirement) are hitting the economy, affecting people’s ability to pay for today and save for the future,” notes BlackRock.
In fact, the need for income among retirees has never been more prominent and that’s simply because inflation remains high. The EBRI study points out that half of current retirees are discovering their spending is more than expected due in large part to housing and healthcare costs. That’s creating other issues for advisors to be mindful.
“Of course, the rub with inflation is that more does not mean better. Despite the increase in elderly spending, lifestyle appears to be declining. The number of retirees who feel that their overall lifestyle in retirement is worse than expected has been growing each year, according to EBRI,” adds BlackRock.
Retirement Outlook Proves Value in Advisor Relationships
Whether it’s inflation, income, broader retirement savings issues or living longer than expected, clients are facing a confluence of retirement challenges. Data confirm as much.
“For the 57 million workers who lack access to a workplace plan, preparing for retirement remains a challenge,” according to BlackRock. “In fact, EBRI found that, while 25% of workers with access report having less than $10,000 in savings, this rate jumps to 70% among workers who lack access. While SECURE 2.0 included important provisions to expand access – particularly to those working part-time or for smaller businesses – there’s more we can and should do across the industry.”
Bottom line: Clients feel as though they’ve suffered retirement setbacks. Advisors can help them generate the confidence and strategies to not only rebound from 2022’s setbacks, but thrive going forward.