January 03, 2023

Dealing With Inflation’s Negative Effect on Employee Retirement Planning

An August 2022 survey from Nationwide Retirement Institute found that 40% of workers age 45 and older plan to delay their retirement due to inflation and rising living costs. That figure is double the percentage of workers who said they delayed retirement last year due to the COVID-19 pandemic. While the current inflationary environment presents a host of retirement plan challenges for both employers and employees, tackling the trend with prudent and sensible solutions remains the best course of action.

Inherent Costs to Employers

The 2022 Nationwide In-Plan Lifetime Income Survey indicates that 36% of private-sector employers say workers’ delayed retirements have affected their ability to hire new talent. In addition, 34% said delayed retirements have affected promoting young workers and 35% said they have made their health benefits plans more expensive.

Nationwide also found that employers are reporting effects to the well-being of their employees because of delayed retirements. Data show that among employers:

  • 30% reported lower team morale
  • 29% reported negative effects on employees’ mental health
  • 27% have noticed lower workforce productivity
  • 22% reported negative effects on the physical health of employees.
  • The study also found that only 58% of workers have a positive outlook on their retirement plan and financial investments, compared with 72% in 2021.

Potential Solutions To Consider

The survey found that 66% of all employees cited inflation as a top retirement concern, versus 53% in 2021. General education campaigns, in partnership with your plan advisor and recordkeeper, should continue to be prioritized and promoted. Focused topics for consideration include defining inflation and current contributing issues and factors, historical contexts, managing inflation risk in your portfolio and staying the course over the long term. These topics could be supplemented with information on general financial wellness, such as budgeting and managing spending, paying down high-interest debt and building an emergency fund.

In addition, plan sponsors may want to consider ways to further support their older workforce and improve their confidence in meeting their income needs as they near retirement. The Nationwide report shows growing interest from workers in lifetime income investment options. According to the data, 53% of all employees age 45 and older are interested in guaranteed lifetime income investment options included as part of a target-date fund, compared with 42% in 2021; 48% reported they are interested in contributing to such investment options as part of a managed account; and 41% would likely roll over retirement savings into a guaranteed lifetime income investment option if they had the chance.

The 2022 Nationwide In-Plan Lifetime Income Survey can be viewed at: https://tinyurl.com/5hxxa3nk.




For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

This material is not a recommendation to buy or sell a financial product or adopt an investment strategy. Plan sponsors should discuss their specific situation with their financial professional.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.