40% of Older Americans Are Pushing Back Retirement Due to Inflation

Inflation is forcing older American workers to delay their retirement, leading to higher benefits costs for employers, stalled career progress for younger workers, and reduced morale and mental health for team members, according to new research from the Nationwide Retirement Institute.

The institute’s 2022 In-Plan Lifetime Income Study showed that 40% of older American workers plan to retire later than they had planned due to high inflation. That is twice as many as those who planned to postpone their retirement because of COVID-19. Before inflation began to rise, the average expected age for retirement plan participants older than 45 was 65.4, according to the study. Inflation has pushed that number sharply higher to 68.3. Edelman Data and Intelligence conducted the survey on behalf of Nationwide this summer. Respondents included plan sponsors and benefits decision-makers from both the private and public sectors and employee participants in retirement plans.

The delayed retirements have a range of ramifications on workplaces, and 67% of company plan sponsors and 84% of government plan sponsors said the delayed or canceled retirements concern their employers, according to the survey. Among the concerns is the downstream impact on younger workers. For instance, 36% of private-sector employers said that delayed retirements affect their ability to hire new talent, and 34% said it hinders their capacity to promote young talent. Meanwhile, 35% said the presence of workers for longer than expected raises the costs of their health and benefits plans, and 34% said they are paying higher salaries to longer-tenured workers.

According to employers, delayed retirements are harming the well-being of workers. Thirty percent of employers cite lower team morale as an impact of the postponed retirements, 29% say the delayed retirements have negatively impacted employees’ mental health, 27% believe they have led to lower productivity and 22% report they have worsened the physical health of employees.

“We’re watching delayed retirements impact employers’ entire talent lifecycle, and it may be unintentionally contributing to ‘quiet quitting,’” said Amelia Dunlap, vice president of Nationwide Retirement Solutions marketing, in a press release. “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. Employers should look for opportunities to better support their older workforce as they near retirement.”

Top retirement concerns

Overall, 66% of employees 45 and older cite inflation and the higher cost of living as their top retirement concern – up from 53% in 2021’s survey – making it the top-cited concern among employees. Other frequently cited retirement concerns among those 45 and older include the cost of health care (64%), the impact of market volatility on retirement income (62%) and not receiving enough financial support from government benefits such as Medicare and Social Security (58%). Of those expected to delay retirement due to inflation, 73% say that they are worried they will not have enough money saved for the income they need in retirement, and 47% point to declining retirement savings due to market volatility as a reason to keep working. In addition, 42% said they had to reduce their savings because of the rising cost of living.

Employee concerns have led to a sharp uptick in their interest in their retirement plans. In fact, 76% of private plan sponsors said that team members have become more focused on retirement planning since inflation began to rise, and 82% say employees are asking more about how to better prepare for retirement. In response, employers are increasing their resources to help employees navigate the challenges associated with inflation as 70% of private employers and 91% of government employers have added investment options to help employees save for retirement.

Still, just 58% of employees have a positive outlook on their retirement plan and financial investments, down from 72% in 2021. However, confidence varies between the public and private sector with 75% of government employees saying they are on the right track to being financially prepared for retirement vs. 56% of those in the private sector. Similarly, government employees have lower expected retirement ages – 65.2 years old for plan participants currently 45 and older vs. 68.3 for workers overall.

Nationwide, which offers guaranteed lifetime income solutions, also noted that 53% of employees in the survey are interested in guaranteed lifetime income investment options as part of a target-date fund, which represents an 11-point increase over last year.

Dunlap pointed to changing conditions as a factor in the increased interest. “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,” said Dunlap.