Inflation roiling retirees, especially boomers, says Goldman survey

A new Goldman Sachs Asset Management survey fingers inflation as the No. 1 concern for plan participants both before and after retirement.

According to Goldman’s annual Retirement Survey & Insights Report released Wednesday, a clear majority (71%) of retiree respondents identified rising prices as their primary concern, followed by future health care concerns (51%), concerns about potential reductions in future Social Security benefits (46%) and running out of money (44%).  

The report also revealed that 51% of respondents who are currently retired said they are living on less than half of their pre-retirement annual income, including 29% living on 40% or less. Furthermore, only a quarter of the retirees surveyed generate 70% of their pre-retirement income, the amount many experts estimate is needed to maintain their standard of living.

“The current environment is driving considerable uncertainty for retirees. And those living on less than half of their pre-retirement income are particularly vulnerable,” Greg Calnon, head of multi-asset solutions at Goldman Sachs Asset Management, said in a statement.

Calnon added that spending needs are primarily elevated due to high inflation, while “fixed income portfolios are under pressure due to rising interest rates, and equity portfolios have declined notably as the markets try to assess the impact of a potential recession.”

Other highlights from the survey include the fact that more than half of respondents retired early, although not necessarily because they could afford it.

Nearly half of all retirees retired due to reasons out of their control, such as health issues, losing their job or caring for family, reducing their time to save for retirement. Other top reasons for retiring early included being tired of working (13%), hitting the Social Security age (13%) and their employer offering a retirement package (11%).

A mere 7% of retirees stopped working because their savings were sufficient to fund their retirement, according to the report.

Aside from inflation, generating retirement income was a top challenge for retirees, along with calculating longevity risk. Retirees surveyed said the most unexpected aspect of managing their spending was understanding what their income will be in order to know how much they can spend, followed by health care costs, housing and home maintenance costs, and supporting family members (11%).

Three-quarters of retirees said they would like to receive at least half of their retirement income from guaranteed sources, including Social Security, but only 55% are achieving this goal.

As to whether a lack of savings and income in retirement is causing them cut back on spending, 42% of retirees surveyed said they are spending less in retirement than anticipated, while 31% are spending what they expected. Twenty-two percent are spending more.

BUMMED OUT BOOMERS 

Aside from wrestling with inflation, Goldman’s report found Americans across all generations are suffering from life events that have derailed their ability to save for retirement.

According to the report, 53% of working baby boomers and 51% of Gen X respondents said they are behind in their retirement savings, citing reasons such as credit card debt, paying existing loans, saving for college, caring for and financially supporting family members, time out of the workforce, financial hardship and too many monthly expenses.

Moreover, only 11% of working baby boomers and 12% of Gen X are “very confident” in meeting their retirement goals, the survey showed. Another 40% of working baby boomers and 32% of Gen X respondents are just “somewhat confident,” while 30% of working baby boomers and 40% of Gen X expressed concerns about meeting their goals.

Younger generations meanwhile have more positive outlooks. The survey showed that just 34% of millennials and 27% of Gen Z respondents report being behind schedule in their retirement savings. Additionally, 31% of millennials and 31% of Gen Z are “very confident” they will meet their retirement goals, while just 19% of millennials and 12% of Gen X expressed concerns, the survey said.

“Having dealt with life’s other financial challenges, many retiring baby boomers are feeling the pinch of inadequate retirement savings,” Chris Ceder, senior retirement strategist at Goldman Sachs Asset Management, said in a statement. “Gen X is now at the critical stage to navigate myriad short-term goals, such as college savings, caregiving and family life, all while keeping their long-term savings on track. While many survey respondents report being behind schedule, there is still time to adjust. However, the timeline is narrowing.”