Annual study shows inflation is a top concern for workers ahead of retirement

The U.S. Census Bureau reports that around one in five (21%) Floridians are aged 65 or older, meaning they’re retired or will soon be.

An annual study from American Century Investments shows that inflation remains a top concern as workers prepare for retirement.

However, Senior Retirement Strategist Glenn Dial tells WMFE’s Talia Blake optimism remains high.

 Glenn Dial is a Senior Retirement Strategist at American Century Investments.

Glenn Dial is a Senior Retirement Strategist at American Century Investments.

Talia Blake: A recent study from the American Century investments shows that three out of five respondents will be the same or better when they retire. But with inflation continuing to impact us, why do you think people are still optimistic?

Glenn Dial: Well, I think one of the reasons is if we go back and look at a law that Congress passed back in 2006, this law actually allowed employers to automatically enroll their employees into the 401k plan, to automatically increase their savings, and to automatically invest the money for them and something called a target date fund. So what has happened for the employers who have taken advantage of this, which is way over half — if you’re an employee, you’re looking at your account balance and saying, ‘Wow, it’s been going up almost every year. And I did something really good as an employee last year, when the markets went down.’ They stayed the course, meaning they kept buying when the markets went down. They were buying at lower prices. And now the market has rebounded somewhat. So net net, even though we’re coming off a pretty bad year, there’s a lot of optimism for working Americans when they look at their 401k account.

Talia Blake: So you just talked about some of the changes that employers have made. Can you elaborate on that? What other changes have employers made to help employees plan for retirement?

Glenn Dial: Well, there’s some big ones on the horizon, and here’s what’s going on. Many Americans are still, especially as we get older, are worried about market risk meaning the stock market could go down right before I retire right, after I retire, or I could live too long. I could outlive my savings. So what are employers doing? Well, Congress passed some new laws just a couple of years ago. Employers are now going to be able to add new features and products that will protect someone’s income from a market correction, and guarantee that will last a lifetime. So that’s a game changer. So now 401k plans in the very near future are going to look and feel a lot more like a traditional pension plan, where the average working American doesn’t have to worry about what’s the stock market doing today. When am I going to retire? Am I going to live too long? So this was a game changer, and it’s on the horizon.

“… the bottom line is it’s the amount that you save is key no matter what you’re investing in or what you’re doing. It’s saving and saving as much as you can as early as possible.”

Glenn Dial

Talia Blake: So speaking of people being concerned with market crashes and that kind of being addressed, what are people’s top concerns right now when it comes to saving for retirement?

Glenn Dial: We’ve done this survey for 10 years. Last year was the first year ever that inflation risk was number one. And we can see why. Right? Cost of just about everything went up. Inflation was officially up eight percent last year. So that was number one. But usually, number one and number two are always market risk and longevity risk is really what keeps people awake at night. It’s kind of the Ying and the Yang because you want growth out of your investments to outpace inflation, but you don’t want to lose too much either. So it’s a fine balancing act that both employers and employees are doing. I jokingly say for those that are eating right and exercising every day, they could live too long and outlive their savings. So, those are real concerns.

Talia Blake: Earlier you were talking about how employers have really stepped up to help streamline the process for employees to have a retirement account like a 401k. According to the U.S. Census Bureau, nearly half of baby boomers don’t have a retirement account. So what options are out there for those who haven’t been saving?

Glenn Dial: Yeah, if they haven’t been saving — And we get this a lot, especially as we turn older. Someone turns 50 or 55, and all sudden it becomes real. They’re like, ‘wait a minute, I haven’t saved enough. What do I do?’ Well, first and foremost, if you haven’t saved try and save as much as you can. Inside of a 401k plan, there are catch up provisions that are allowed. You can save outside your 401k,obviously. You can meet with a financial advisor and or CFP, and have them put together a plan for you. So there are other options outside of 401ks, but the bottom line is it’s the amount that you save is key no matter what you’re investing in or what you’re doing. It’s saving and saving as much as you can as early as possible.

Talia Blake: For those people who have been saving and are actually looking to retire maybe this year or next year, what should they be looking out for as they prepare for that?

Glenn Dial: If they’re in a target date fund or managed account type thing, the rule of thumb is to start taking risk off the table the closer you get to retirement. So, what that means is you’re shifting from a high stock allocation to a higher bond allocation. So as you get older, you don’t want to get out of stocks, but you still need that growth. You still need to keep pace with inflation, which as we know is real. So you still need the growth, but you need less risk as you get older. Now, traditional target date funds do that automatically for you. Now, if you’re not in a target date fund, you need to keep an eye on that. You need to look at your 401k statement and make sure you know how you’re allocating, you’re comfortable with the amount of risk that you’re taking, or get help from a financial advisor. The last thing I would say is if they want more information, they can go to

Talia Blake: Thank you so much, Glen, for your time.

Glenn Dial: Thank you. Thank you for having me.

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Read More: Annual study shows inflation is a top concern for workers ahead of retirement

2023-09-05 18:25:00

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