How Social Security and Recession Fears Have Delayed Timely Retirement for 25% of Pre-Retirees

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Many Americans have been putting their retirement plans on hold lately, as sticky inflation combined with soaring rates and an uncertain economic landscape have put a strain on wallets and left little for savings. Adding to these issues, fears around Social Security and a potential recession have also left many Americans unsure about the status of their golden years. 

Indeed, a new study found that 25% of pre-retirees — defined as non-retired Americans ages 55 to 65 — say they are planning to retire later than expected, according to Nationwide’s eighth annual Advisor Authority survey, powered by the Nationwide Retirement Institute.

What’s more, the survey found that 46% of pre-retiree investors view an economic recession as one of the most immediate factors that pose a threat to their retirement portfolio, with the top concern being inflation, at 60%.

Although economic stressors are continuing to weigh on investors’ minds, many economists, including those at Nationwide, are predicting a short or shallow recession, said Eric Henderson, president of Nationwide Annuity.

The best thing investors can do right now is work with an advisor who can help them remain “calm, nimble and informed” when it comes to adjusting their plans, Henderson said. 

“Our survey found that nearly half of advisors are helping their pre-retiree clients prepare for near-term retirement by adopting strategies to protect their clients’ assets against market risk and ensuring their pre-retiree clients have enough liquidity to cover expenses for two years in the event of a financial crisis,” he said. 

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In terms of Social Security, its viability is in question for many Americans, as 53% of pre-retirees are concerned about it, while 26% believe it will run out of funds in their lifetime. 

According to Henderson, pre-retirees’ fears about the viability of Social Security are not unwarranted. 

“The likelihood of Social Security payment amounts being impacted for some recipients is becoming a greater possibility, although I’m hopeful Congress will develop a plan to shore up the long-term viability of the program,” he said. 

And according to the 2023 Annual Report of the Social Security and Medicare Boards of Trustees, Social Security will be able to pay full benefits until 2034 but will then face funding shortfalls if lawmakers don’t take action.

In the meantime, Henderson recommends investors work with an advisor who can guide them on the right time to claim these benefits. 

“These decisions have broad-reaching implications for income over the course of retirement — which for many people could be 25-30 years or longer. Investors should also be talking with their advisor about creating predictable streams of income as well, leveraging the money they have saved to ensure they are secure in their retirement,” he added. 

Finally, another finding of the survey is that 15% of pre-retirees are unsure they will ever retire. 

Asked whether he found this finding surprising, Henderson said that it’s not, as they are dealing with a unique set of circumstances, including high inflation, an economic recession and market volatility posing immediate challenges to their retirement portfolio

Are You Retirement Ready?

“However, advisors can help these clients by having positive conversations about their retirement goals, helping them predict and plan for fixed expenses and determining the right time to claim Social Security,” he said, adding that they can also help investors with strategies that lead to security in retirement, like incorporating annuities into their retirement plans to guarantee income and protect against outliving their savings.  

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