Inflation’s Impact on Retirement Plan Savings

The past two years, beginning with the COVID pandemic, have put pressure on Americans’ finances. From job losses to market volatility to soaring inflation, the economic toll has tested their financial confidence.

New research found that 34% of retirement plan participants had a decrease in their financial health and, 66% reported that income hasn’t kept up with inflation.[i] Despite the economic issues, however, most retirement plan participants continued contributing to their workplace retirement savings plan.[ii]

Even more surprising is that the number of participants who increased their savings rates outpaced those who lowered their savings rates.[iii] While prioritizing retirement, many are making changes to their financial habits, such as:

• Creating a budget
• Cutting back on daily expenses
• Switching to lower-cost brands
• Delaying large purchases
• Talking to a financial professional

It's encouraging to learn that plan participants are not letting economic worries derail their retirement. However, there's still a need for financial decision-making support – and many may not be aware that the support they seek can come from sources made available through their employment.

When working together with their retirement plan advisor, employers can develop a year-long communication strategy that assists employees:

• Create awareness about the available financial services
• Remind employees to stay the course rather than make impulsive changes
• Provide general financial education to improve financial literacy
• Adapt messages to different demographic groups for greater impact over general advice
• Share economic and market information to help ease anxiety and encourage caution about taking actions they may regret later

During this period of financial uncertainty, Americans are searching for information and advice. Plan sponsors that coordinate with a retirement plan advisor to provide timely education, guidance, and advice can help employees make informed financial decisions. Contact AssuredPartners Investment Advisors to learn how you can give your employees the confidence needed to better weather economic ups and downs.

[i] Are inflationary pressures affecting employees’ retirement plan savings,” Empower Retirement, June 2022
[ii] Ibid.
[iii] Ibid.