Hybrid schedules. Mental and physical wellness. Fairness and equity. The US workforce emerged from COVID-19 with very different attitudes toward these needs—and in many ways, public-health uncertainty magnified financial uncertainty. More workers today say they’re stressed about money—that anxiety can be a big hit to mental wellness, which can ultimately impair corporate financial health.
Even as existing workers’ priorities shift, employers are drawing from a very different post-pandemic labor pool, with job seekers expecting more. There’s more focus on work-life balance, diversity and inclusion, and better benefits—especially retirement plans that foster stability and a sense of security. With the tightest labor market in decades, people are more willing to change jobs to fulfill their expectations, causing mobility trends to spike. A record 47 million Americans quit in 2021 during this “Great Resignation,” per the Bureau of Labor Statistics, seeking new jobs or heading into retirement.
Uncertainty About Retirement Income Is Up
In this competitive environment, firms should revitalize their employee value proposition, starting with addressing workers’ desire for long-term financial security. Based on a Mercer survey, the average person spends 13 hours per month worrying about personal finances, and the retirement dimension undoubtedly plays a big part: 58% of respondents in an Employee Benefit Research Institute/Greenwald Research survey said preparing for retirement “makes them feel stressed.”
Between the COVID-19 economic shock and heightened political and market turmoil in recent years, participants have become even more wary financially. Over 60% admit the harsher backdrop has sapped confidence in their retirement planning ability, according to AB’s Inside the Minds of Plan Participants survey. And most fear they won’t have enough income to maintain their standard of living once they’re in retirement. Nearly one-third said the pandemic alone altered their retirement course, either shrinking savings or delaying retirement dates.
These trends are especially concerning when one in three participants says future income is the only reason for saving. Despite the high stakes, many don’t have a clear picture of how much they can withdraw in retirement. Among survey respondents, 28% believe they can take out 4%–6% annually without outliving their money (Display). Our research and other analyses suggest that the rate is much lower, yet only 12% of participants selected the lowest withdrawal range of 1%–3%.
Based on these results, it’s highly likely that participants will overspend initially and either run out of money or be forced to cut back sharply in a downturn. The other risk: participants withdraw far too little because they’re left with no other option. All this puts retirement income front and center, with an urgent need to boost participants’ confidence by enabling them to lock in an income stream for life.