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: Retirees are leaving work earlier than expected and living on less


More than half of retirees left work before they planned, often for reasons beyond their control, which limited their ability to save and reduced their income in retirement, according to a new report from Goldman Sachs Asset Management.

A total of 56% of retirees reported retiring earlier than planned. Almost half (48%) of all retirees retired due to reasons out of their control, such as health issues (23%), losing their job (11%), or caring for family (9%), which reduced their time to save for retirement, according to the Retirement Survey & Insights Report 2022.

Other top reasons for retiring earlier included being tired of working (13%), hitting the Social Security age (13%), and their employer offering a retirement package (11%). Just 7% of retirees reported retiring because their savings were sufficient to fund their retirement, the report found. 

The report also found that 51% of respondents who are currently retired said they were living on less than 50% of their preretirement annual income, including 29% who reported living on 40% or less. Only 25% of retirees generated what many experts see as the rule of thumb to maintain the same standard of living: 70% or more of preretirement income.

“The current environment is driving considerable uncertainty for retirees. And those living on less than half of their preretirement income are particularly vulnerable,” said Greg Calnon, Head of multiasset Solutions at Goldman Sachs Asset Management. 

Most retirees reported their greatest concern currently as inflation (71%), followed by future healthcare concerns (51%), worries about potential reductions in future Social Security benefits (46%), and running out of money (44%). Each of those percentages has increased since the same report in 2021.

“Spending needs are primarily elevated due to high inflation, 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. We believe these challenges raise concern for retirees regarding how much they can spend and how long their savings will last,” Calnon said.

Maria Vassalou, co-chief investment officer of multiasset solutions at Goldman Sachs Asset Management, said inflation may be peaking even though there’s still persistent gains in wages and a very tight labor market. 

“We expect the Fed to get inflation under control,” Vassalou said.

The report also looked at how various generations are affected by competing financial priorities and life events that have hurt the ability of many to save for retirement.

The challenges that hindered retirement savings included 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, the report found.

As a result, 53% of working baby boomers and 51% of Generation X respondents said they are behind in their retirement savings. Only 11% of working baby boomers and 12% of Gen X are “very confident” in meeting their retirement goals, the report said. 

Younger generations, who have more time to save for retirement, had brighter outlooks: just 34% of millennials and 27% of Generation 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.

Among the reasons working respondents gave for falling behind, 46% reported that a financial hardship caused them to stop saving for retirement, some for three years or longer. In addition, 43% of working respondents reported they needed to take time away from the workforce to provide caregiving for a family member. When they did, 39% said it caused them to use some of their retirement savings and 25% stopped saving for retirement.

“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 Goldman Sachs Personal Financial Management. 

During the COVID-19 pandemic, 14% of working baby boomers, 25% of Gen X, 33% of millennials and 32% of Gen Z respondents said they withdrew money from their 401(k) plan without penalty to cover expenses. 

Over half (58%) of working baby boomers said they would not pay back these funds within three years, while most Gen X (65%), millennials (81%), and Gen Z (72%) respondents reported that they would repay their 401(k) accounts within that time period.

As a result, 37% of working respondents expect the effects of the pandemic to delay their retirement.

“The financial vortex is the new reality for retirement savers today,” said Mike Moran, senior pension strategist at Goldman Sachs Asset Management. “Some challenges are common life events, such as buying a home or starting a family, but market volatility and high inflation are beyond individual control. It’s not a question of if, but when, someone will be impacted.”

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