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The economy is causing some pre-retirees to rethink retirement

A survey shows retirement fund investors are planning to work longer

Updated:

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By:
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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.

Photo by Markus Spiske on Unsplash

Key Insights

  • 42% of pre-retiree investors say their retirement plans have been delayed, altered, or cancelled due to recent economic conditions.
  • Rising costs and persistent inflation are making traditional retirement age and savings benchmarks seem out of reach for many.
  • More pre-retirees are considering working during retirement or delaying retirement, abandoning the conventional ‘rules of thumb’ followed by previous generations.

American investors who are approaching retirement are beginning to have second thoughts, according to a new study by the Nationwide Retirement Institute. More than two-fifths (42%) of these investors report that their dreams of retirement have been delayed, altered, or cancelled due to economic shifts experienced in the past five years.

A little over half of pre-retirees cite the increased cost of living as their largest long-term challenge. Meanwhile, inflation has compelled 15% to postpone their retirement plans. 

These pressures are shifting focus: 20% now say their top financial concern for the coming year is saving enough for retirement. In response, 35% plan to keep working in some capacity during retirement, and 27% are actively delaying retirement—both markedly different strategies compared to those embraced by previous generations.

“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,” said Craig Hawley, president of Nationwide Annuity. 

He added that in the face of inflation, market volatility, and concerns about running out of money, pre-retirees are abandoning strategies that were once considered standard.

Ditching traditional retirement rules

Nearly six in ten pre-retirees (59%) say their expectations for retirement have shifted dramatically in just five years. There is a clear move away from old benchmarks:

  • The “4% Rule” (withdraw 4% of your retirement portfolio annually) is now seen as irrelevant by 35% of pre-retirees, with 13% abandoning it outright.
  • The “100 Minus Age in Stocks” rule, which suggests subtracting one’s age from 100 to determine the ideal percentage of stocks in a portfolio, is dismissed by 53%.
  • The very idea of a “magic number” savings goal is doubted by 52% of pre-retirees, while nearly two-thirds (64%) believe retiring at 65 is no longer feasible for people like them, up from 59% a year ago.

Despite their clients’ skepticism, financial advisors continue to uphold traditional retirement strategies. Eighty-four percent still support the 4% Rule, and 73% see continued value in “100 Minus Age in Stocks.” However, a disconnect has emerged: more than half of pre-retirees don’t currently work with an advisor, and of those who do, 28% have only recently sought professional guidance.

New challenges

While advisors maintain faith in time-tested rules, they’re acutely aware of new challenges: nearly half (46%) say inflation is driving their clients to rethink retirement, with comparable shares pointing to the rising cost of living (45%) and fears of running out of money (37%). 

Advisors are also seeing changes in how retirement unfolds, with 42% reporting clients plan to “phase” into retirement by reducing work hours or taking intermittent breaks.

“Pre-retiree investors are at an age where the financial decisions they make can carry massive implications for their retirement security,” Hawley said. 

He stressed the value of working with a trusted financial professional to develop holistic plans that encompass Social Security, health care, taxes, and income strategies, potentially helping pre-retirees adapt to changing realities while there is still time to act.