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Most Investors Unwilling to Curtail Retirement Contributions

Practice Management

While inflation is causing a significant amount of stress and anxiety, a new survey finds that most American investors remain committed to their long-term financial goals. 

In the past 12 months, rising inflation has caused the greatest proportion of investors (51%) to curtail discretionary spending such as dining out and entertainment, according to findings from State Street Global Advisors’ Inflation Impact Survey. Additionally, 35% spent less on vacations or delayed a major purchase, and 29% have cut back on essential expenses like groceries and gasoline. 

Despite these financial adjustments, however, fewer than a quarter of Americans were willing to curtail contributions to their retirement savings or their child’s education savings, demonstrating a firm commitment to their long-term financial goals, the survey found. “As Americans work to defend themselves against the corrosive effect of inflation on their finances, we’re encouraged to see the majority are making tradeoffs in discretionary spending, rather than sacrificing contributions to their long-term savings goals,” notes Brie Williams, head of Practice Management at State Street Global Advisors. 

Still, the survey found that with inflation on the rise, 67% of respondents are concerned about our country’s economic outlook over the next 12 months, with 57% also expressing concern over market volatility and 59% expressing concern about the value of their current investments eroding. 

Furthermore, they don’t believe the worst is over. Fewer than 2 in 10 respondents (17%) believe inflation has already seen its peak—a sharp contrast to the 49% who don’t think so.

Sandwich Generation Distress

Notably, Generation X is significantly more concerned than Millennials and Boomers about the economic outlook, maintaining their current standard of living, retiring on time and affording expenses in retirement. In June 2021, concern about rising inflation was similar across generations, but by June 2022 that had changed, as 88% of Gen X-ers indicated concern, compared to 72% of Millennials and 70% of Boomers.

Being able to afford to retire when planned is another worry with 59% of Gen X expressing concern over this, compared to 41% of Millennials and 31% of Boomers.

Similarly, being able to afford expenses in retirement was also a bigger worry for Gen X, with 56% expressing concern, versus 41% of Millennials and 44% of Boomers.

The outlook for their personal financial situation wasn’t much better, as 56% of Gen X-ers expressed worry about maintaining their current standard of living, compared with 46% of Millennials and 43% of Boomers. Consequently, significantly more members of Gen X have cut back on spending in the last 12 months compared to Millennials and Boomers.

“These are challenging times for many Americans. About half of all investors believe that the lessons learned by navigating the current inflationary environment will have a lasting impact on their spending and saving habits moving forward,” Williams further observes. “Making prudent financial decisions during times of uncertainty could make committing to a budget or investment discipline easier when the economy improves.” 

The findings are based on a survey conducted by SSGA from June 28–July 5, 2022, in partnership with A2Bplanning and field partner Prodege, among a nationally representative sample of 243 adults with investable assets of $250,000 or more.