Economic Concerns Lead 23% of Americans to Delay Full Retirement Age Plans

A recent survey conducted by F&G Annuities & Life indicates that a significant portion of older Americans are choosing to delay their retirement, citing economic concerns and personal financial uncertainty as key reasons for their decision. The survey, which engaged 2,000 U.S. adults aged 50 and older, revealed that 23% have made the choice to postpone retirement plans compared to 14% two years ago. This shift highlights a growing apprehension about the readiness to retire amid financial volatility.

The backdrop to this trend is the median savings of 55-year-olds, which stands at a mere $50,000—a figure insufficient to guarantee financial security in retirement, according to a study by Prudential Financial. This situation underscores the anxiety among future retirees, particularly Gen X individuals aged 45 to 60, whose older members are approaching retirement age.

The average retirement age in the United States is 62, marking the earliest opportunity for individuals to claim Social Security benefits. Yet the decision on when to start claiming these benefits significantly impacts financial outcomes. Those born in 1960 or later have a full retirement age set at 67, which allows them to receive full Social Security benefits. However, postponing claims until age 70 can enhance monthly benefits by an additional 24%.

The F&G survey illustrates that among the 23% planning to delay their Social Security claims, half cited financial uncertainties or economic volatility as the primary motivation—a 10% increase compared to the previous year. Concerns about inflation were acknowledged by 44%, while 34% expressed apprehension over possible recessions or stock market instability.

Social Security benefits, unlike some other retirement savings mechanisms, are safeguarded against inflation through annual cost-of-living adjustments. This feature offers some reassurance to those nearing retirement, even as financial advisors are urging individuals to consistently save money. An advisor noted that any amount of savings, even minimal, is better than none in safeguarding future financial stability.

In light of these circumstances, various financial advisors are adjusting their retirement advice strategies. Two-thirds report changes due to inflationary pressures and uncertainties surrounding Social Security and Medicare. They are advocating for consideration of phased retirements or part-time work to secure financial stability during unpredictable times.

Discussions about sequence risk, particularly regarding the timing of withdrawals from retirement accounts, are becoming increasingly central in financial planning conversations. Advisors are emphasizing the significance of considering this risk when structuring retirement plans. Retirees relying solely on their portfolio for income could be vulnerable to market downturns, necessitating adjustments to plans accordingly.

Financial planners stress the importance of establishing cash buffers and revisiting asset allocation models to mitigate sequence risk. Creating "safe buckets"—holding one to three years' worth of income in cash or near-liquid assets—is recommended to help buffer against market volatility. Interest in guaranteed income solutions like annuities, alongside tax-efficient strategies such as income-producing tax-deferred accounts, is on the rise.

In response to the shifting landscape, advisors are also exploring alternative asset classes to enhance yields and diversification beyond publicly traded bonds, including private credit, real estate, and equity options.

As more individuals reassess their retirement plans, the focus remains on ensuring adequate preparation to navigate economic uncertainties. Analysts predict that ongoing volatility and financial pressures will continue to shape retirement strategies, urging individuals to stay informed and adaptable in planning for their future.