A  majority of retired Americans are living on less than half of their preretirement annual income, even when Social Security is included, according to a survey by Goldman Sachs Asset Management.

The survey also found that 29% of retired respondents are getting by on 40% or less of their preretirement income.

“The current environment is driving considerable uncertainty for retirees, and those living on less than half of their pre-retirement income are particularly vulnerable,” said Greg Calnon, GSAM’s head of multi-asset solutions.

Goldman Sachs Asset Management's recently released Retirement Survey & Insights Report for 2022, conducted in July and August, took data from more than 1,500 U.S. adults of various ages.

The causes of financial stress were many and varied, but topping the list were high inflation (cited by 71% of respondents), future healthcare needs (51%) and potential reductions in Social Security (46%).

Calnon noted that low yields on fixed-income portfolios and declining equity markets were contributing to the anxiety as well. Retirees, he said, are deeply concerned about “how much they can spend and how long their savings will last.”

Working People Also Fall Short
It’s not just retirees who are concerned, either. The survey also found the following:

Mike Moran, senior pension strategist at GSAM, said a “financial vortex” is impacting current retirement savers. They’re pulled one way by wanting to save in order to start a family or buy a home, yet at the same time they’re beaten down by market volatility and high inflation, he said.

Most respondents, he said, have a pervasive fear that it’s not a question of if but when their plans will be upended by events beyond their control, such as a bear market. “Knowing how to adapt [to unplanned events] to keep retirement savings on course is key to navigating these challenges,” said Moran.

But how can clients navigate through these challenges?

The study suggests that identifying how individual pressures impact different sorts of clients is a valuable first step.

For instance, too many monthly bills was listed as a main problem by 84% of millennials (those born between 1981 and 1996) but only 56% of baby boomers felt that way—with other generations falling between those figures. Financial hardships such as home repairs were a top concern for more than 75% of millennials and those born between 1997 and 2012, known as Gen Z, but the same was true for only 51% of baby boomers.

 

Supporting family members was a top concern for 79% of millennials but only 38% of baby boomers. Paying down student loans and other debts ranked highly for 76% of millennials and just 36% of baby boomers. Lastly, credit card debt was named as a major drain for 71% of millennials and 40% of baby boomers.

Also, 43% of all working respondents reported they had needed to take time away from work to provide caregiving for a family member.

“Family responsibilities have forced ‘the sandwich generation’—those balancing caring for their aging parents and their own children—to deprioritize their long-term financial well-being, potentially impacting their retirement savings,” said Joe Duran, head of personal financial management at Goldman Sachs.

The Covid pandemic didn’t help any. Many working respondents withdrew funds from their 401(k)s to cover expenses, and 58% of baby boomers expected they wouldn’t be able to repay this money for at least three years, he said.

One conclusion from these statistics is that many clients feel forced to choose between their current obligations and their desire to save for the future. But Greg Calnon, head of GSAM’s multi-asset solutions, stressed that long-term retirement savings and immediate financial responsibilities can “co-exist.”

Chris Ceder, senior retirement strategist at GSAM, added that it’s not too late for most clients to get on course. “While many survey respondents report being behind schedule, there is still time to adjust,” he said.

The Need For Professional Guidance
This is where the financial advisory industry can help.

Among retirees, 79% said that financial advice and guidance are “important” to them. As for how they prefer to receive this support, 46% favored personal contact with an advisor. Only 27% preferred digital advice, and another 27% preferred a combination of both.

The survey also found that people seek financial guidance primarily for concerns about generating income (34% of respondents), understanding how long their savings will last in retirement (32%), and figuring out how to keep their savings on track (29%).

“Most advisors offer retirement accumulation and income planning, but not enough support clients in budgeting or managing competing financial priorities from elder care to education funding,” said Duran. “True financial planning requires working closely with clients on their entire financial lives.”

For those already retired, generating lasting income was a crucial concern.

“A clear theme from our findings is retirement income uncertainty,” said Moran.

Indeed, 42% of retirees wanted retirement income that’s consistent and stable. Many also favored finding part-time work to generate extra income in retirement, a desire cited by 34% of retirees—which was an increase of 9 percentage points from last year’s survey, perhaps indicating a greater need for or greater scarcity of opportunities.