Has pandemic, inflation ruined retirement savings? Not so much, say most Americans

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Nearly eight in 10 Americans are confident that they are on track to retire how and when they want. However, one-quarter are less confident now than they were before the pandemic and inflation of the past two years.

Many Americans are concerned that they have lost ground in their retirement plans, according to the 2022 State of Retirement Planning survey from Fidelity. More than 90% of those with a plan in place feel at least somewhat confident, with men more likely than women to be very confident.

Among generations, boomers are the most confident that they will achieve their short-, medium- and long-term financial goals: 71% of respondents are very concerned about the impact of inflation on their retirement preparedness, while 31% are not sure how to keep up with inflation. Nearly one-third believe it will take two or three years to get their plan back on track, while 6% don’t believe they ever will do so.

Consumers have taken several actions to improve their financial situation:

  • 43% remained invested in the stock market
  • 31% paid down debt
  • 29% redirected money to savings
  • 17% revised or established a budget
  • 18% built up a retirement fund

More than half of Next Gen Americans put their retirement planning on hold during the

pandemic, while one-third now plan to retire later than expected and 45% don’t see a point in saving until things return to normal. However, 65% of investors – and 74% of young investors — said 2022 is they year they will put the pandemic behind them and focus on the future.

Across all generations, more than half quit or are considering quitting their current job, and 21% of those who quit and had a 401(k) cashed out of it.

The top concerns vary by generation and how close respondents are to retirement. Next Gen savers have time but need to ensure they are making smart retirement decisions. Older millennials have moved into their peak earning years. The oldest members of Generation X are now five years from retirement, and most boomers are making the transition to living in retirement.

Generation X is the least likely to have given thought to when they want to retire; least likely to know how much money they will need to retire; and haven’t thought about or have only a vague idea of the best retirement plan. More than six in 10 Gen X women have yet to create a retirement plan.

Drawing down too quickly on retirement savings is a concern for boomers: 15% believe a financial professional would recommend a withdrawal rate of 10% to 15% of retirement savings each year, far above Fidelity’s suggested rate of 4% to 5% annually.

The good news for financial professionals is that having a retirement plan in place can have a profound impact on one’s peace of mind and confidence:

  • 91% of consumers with a plan are confident they will be able to retire how and when they want, compared with 67% of those without a plan.
  • 84% of those with a plan know how much money they will need to retire, while only 56% without a plan know.
  • 77% of people with a plan know what to do to keep up with inflation. Only 57% of those without a plan know.
  • Just 16% of respondents with a plan said they will have to retire later because of the pandemic, compared to 29% of those without a plan.

“Although many Americans are understandably concerned about the economy, record-high inflation and markets at this time, it’s encouraging to see the prevailing emotion has been to stay calm and focused on one’s retirement objectives,” said Kevin Barry, president of Workplace Investing for Fidelity Investment. “Saving for retirement is a goal that is decades in the making, and there naturally will be many twists and turns. However, the best action savers can take is to consistently save and invest.”