Rising Inflation Viewed as Biggest Threat to Retirement in 2022

While Americans worried most about the impact of the COVID-19 pandemic earlier this year, they now see rising inflation as the biggest risk to their retirement plans. 

According to Allianz Life’s annual New Year’s Resolutions Study, nearly half (48%) of respondents identified the pandemic as the most worrisome threat of 2021. However, in looking ahead to 2022, a full one-quarter of Americans now view rising inflation as the single greatest risk to their retirement plans—more than doubling from 2020, when only 8% of respondents said the same. 

In fact, the findings show that the concern about inflation is significantly higher than other risks to retirement, many of which saw a decline in concern from 2020: 
 

“Given the seemingly constant changes with the pandemic, it’s no surprise it is top of mind for the majority of Americans as they think about saving and spending in the new year,” says Kelly LaVigne, Vice President of Consumer Insights at Allianz Life. “However, inflation is clearly a more pressing concern as people live with it day to day. It’s also forcing them to think about how they can mitigate this significant risk to their retirement security down the road.” 

DIY Approach

Alongside the concern about inflation, the percentage of respondents who identified financial stability as their top focus area for 2022 increased to 30% — the highest since 2017. Yet despite this, most Americans decline to make that commitment via their New Year’s resolutions. 

According to the findings, the percentage of respondents including financial planning in their 2022 resolutions is at an all-time low of 12%, down 21% points from its high in 2009-2010. The primary reasons why people do not include financial planning in their resolutions remain unchanged over the years: 

• believing they already have a solid plan (34%); or 
• believing that they do not make enough money to worry about it (26%). 

In addition, most respondents indicated that they prefer to go it alone rather than seek professional assistance with financial planning. Only 22% of respondents said they are more likely to seek the advice of a financial professional in 2022, down from 27% last year. Allianz Life observes that this confidence could be a reflection of the fact that more people seem to be active in managing their finances — both eliminating bad financial habits and establishing positive behaviors. 

The top bad financial habits from 2020 both saw declines this year, with less than a third (28%) saying they spend too much, down from 32%, and less than a quarter (23%) saying they “save some, but not as much as they could,” down from 27%. Moreover, a third of respondents believe they have no bad financial habits, up from 28% in 2020. 

Millennial Angst

Allianz Life also found that not all respondents are feeling equally confident about the state of their finances. A quarter of Millennials said their financial situation got worse this year compared with 2020, which was higher than both Gen Xers (17%) and Baby Boomers (15%). Moreover, Millennials are particularly concerned that the rising cost of living will affect their ability to pay for necessities (65%) and save enough for retirement (71%) and short-term goals (70%). 

These financial concerns may also be having a negative effect on Millennials’ health, as 46% said they experienced more overall stress this year than last year, the highest of all generations (37% Gen Xers and 27% Boomers). That said, 42% of Millennials are optimistic their financial situation will improve in 2022, significantly higher than Gen X (22%) or Baby Boomer (18%) respondents. 

“Whether you work with a financial professional or set your own agenda for managing your finances in the new year, it’s crucial to consider the various risks like inflation that can derail your financial strategy and adjust accordingly,” LaVigne emphasizes. “Regardless of your age or amount of time until your retirement, it is important to take into account all of these issues and begin to devise an action plan to mitigate these risks.” 

The findings in the New Year’s Resolution Study are based on an online survey conducted Nov. 15-17, 2021, among a nationally representative sample of 1,115 respondents ages 18 years or older.