Retirement confidence is low because of inflation and other financial priorities, according to MFS Investment Management’s 2024 Retirement Outlook.
The firm interviewed participants and plan sponsors and found that of the 1,000 participants it spoke with, only 34% expressed confidence that they would be able to retire at the age that they wanted to.
“Participants feel they have competing financial priorities, so the impact of inflation lessens the amount of money that they have [been] able to set aside for these other things,” said Jeri Savage, retirement lead strategist, and co-author of the report. “Not only is it impacting their retirement balance, but then they have these other competing needs that are competing for those dollars.”
The report found that 61% of surveyed plan participants said they are investing more conservatively, while 75% feel they need to save more, and 58% expect to work longer than planned.
“I don’t think we can say that they’re putting less in because of inflation. I think they’re still deferring the same amount,” Savage said. “I do think there are participants who are not able to defer as much as they would like to their retirement savings because of these other priorities.”
About 79% of the 141 plan sponsors surveyed said competing financial priorities are having a major or moderate impact on a participants' ability to save for retirement, according to the report.
Also, 86% of plan participants say that they are concerned about their participants’ retirement. Only 23% expressed confidence that their participants could retire at the age they were planning to.
Savage said many companies are looking for new and unique ways to help employees grow their retirement assets. One company, she said, has even elected to take the unique step of eliminating its 401(k) plan in favor of a defined benefit plan. Savage did not name the company.
“I don’t think we’ll see wholesale changes, but it does beg the question of, is this a form of innovation that perhaps as an industry we haven’t really thought about [because] we’ve been so focused on [defined contribution] plans.”