Rising Costs Are Affecting Retirement Savings
Consistent employment and regular saving have long been important foundations of retirement security, but many workers continue to face competing financial demands that can make it harder to save, according to survey results that Goldman Sachs Asset Management released last week.
Many respondents are employed, contributing to retirement plans and doing what conventional wisdom tells them to do, yet housing, healthcare, education, caregiving and daily expenses are eating up a growing share of household resources, leaving them with less capacity to save.
“While workers may look financially stable externally, underneath they’re working more, delaying major goals and supplementing their income,” Greg Wilson, GSAM’s head of retirement and co-head of Americas third-party wealth, said in a statement.
Better planning, personalized advice, stronger portfolio construction and retirement income solutions, Wilson said, can help savers make every dollar work harder.
For its report, GSAM in July surveyed 3,612 working individuals across generations and 1,494 retired individuals ages 45 to 75.
With retirement savings proving more difficult, strategies to make saved dollars work harder have evolved, GSAM said. These tools can help participants pursue greater security with the same or fewer dollars, shifting the focus to augmenting retirement savings.
Sixty-four percent of respondents reported that they have a personalized retirement plan. Of these, 72% believe their savings are on track or better, compared with 33% without a personalized plan.
Those with a plan reported increased savings in the past 12 months at a higher level than those without one. Active engagement is key: Ninety-one percent of those with a plan engaged with retirement savings, versus 62% of those without.
Artificial intelligence can expand access to personalization resources, according to GSAM. Fifty-one percent of respondents said they have used AI for retirement planning, most often to learn retirement basics, create a savings plan and estimate how much they may need to retire.
Still, 73% said they prefer human advice for major life events, 69% for emotional reassurance and 63% for tax-sensitive planning and retirement income decisions, respectively.
Respondents are interested in enhancements to their workplace retirement plan, the survey found. The top three enhancements they cited are professionally managed investments with higher return potential, a personalized investment portfolio and a broader range of asset classes.
Among respondents familiar with private market investments, 42% said they would consider them for potentially higher long-term returns, 40% for greater diversification and 38% for inflation protection.
Working respondents worried about outliving their assets are looking for retirement income solutions, according to the survey findings.
Eighty-three percent said they want guaranteed income as part of their income strategy. Fifty-one percent prefer a blend of guaranteed income and flexible access.
Thirty-two percent said they want to optimize monthly income guaranteed for life, even if doing so means giving up direct control over savings and their ability to withdraw large lump sums. Seventeen percent said they want to keep full control over savings, accepting that the guaranteed income will be lower.
See the accompanying gallery for eight ways that rising costs are affecting workers’ ability to save for retirement.
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