Rising Inflation Seen As Biggest Risk To Americans’ Retirement Plans In 2022

Annual New Year’s Resolutions study from Allianz Life finds more commitment to improving finances, especially from Millennials

Although Americans say they worried most about the COVID-19 pandemic in 2021, rising inflation is now seen as the biggest risk to their retirement plans, according to the annual New Year’s Resolutions Study* conducted by Allianz Life Insurance Company of North America (Allianz Life). Nearly half (48 percent) of respondents identified the pandemic as the most worrisome threat of 2021, with the rising cost of living following at 38 percent. However, looking ahead, a full one-quarter of Americans now view rising inflation as the single greatest risk to their retirement plans, more than doubling from 2020 (eight percent).

This focus on inflation is significantly higher than other risks to retirement, many of which saw a significant decline in concern from 2020.

Rising inflation25%8%
Outliving my money8%10%
Increased healthcare costs8%13%
Job security7%12%

“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,” said Kelly LaVigne, vice president of Consumer Insights, 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.”

Less desire for professional help, more do-it-yourself approach
At the same time, the percentage of people who identified financial stability as their top focus area for 2022 increased to 30 percent, the highest since 2017. Despite this, most Americans decline to make that commitment formal via their New Year’s Resolutions. The percentage of people including financial planning in their 2022 resolutions is at an all-time low of 12 percent, down 21 percentage points from its high in 2009-2010. The primary reasons why people don’t include financial planning in their resolutions remain unchanged over the years: Believing they already have a solid plan (34 percent) or that they don’t make enough money to worry about it (26 percent).

In addition, most people prefer to go it alone rather than seek professional assistance with financial planning. Only 22 percent of respondents said they are more likely to seek the advice of a financial professional in 2022, down from 27 percent last year.

This confidence could be a reflection of the fact that more people seem to be active in managing their finances – both in eliminating bad financial habits as well as establishing positive behaviors. The top bad financial habits from 2020 both saw declines this year, with less than one-third (28 percent) saying they “spend too much,” down from 32 percent, and only 23 percent saying they “save some, but not as much as they could,” down from 27 percent. Furthermore, a full one-third believe they have no bad financial habits, up from 28 percent in 2020.

Millennials feeling financial angst, but see the light ahead
Unfortunately, all Americans aren’t feeling equally as confident about the state of their finances. One-quarter of Millennials said their financial situation got worse this year compared to 2020, higher than both Gen Xers (17 percent) and boomers (15 percent). In addition, compared to other generations, Millennials are more concerned about stagnant wages (22 percent vs. 15 percent Gen X and six percent boomers) and job security (21 percent vs. 12 percent Gen X and five percent boomers). Moreover, Millennials are particularly concerned that the rising cost of living will impact their ability to pay for necessities (65 percent), and save enough for retirement (71 percent) and short-term goals (70 percent).

These financial concerns may be having a negative effect on Millennials’ health. More than four in ten (46 percent) said they experienced more overall stress this year compared to last year, the highest of all generations (37 percent Gen X and 27 percent boomers), as well as more stress related specifically to their finances (41 percent Millennials vs. 28 percent Gen Xers and 16 percent boomers).

That said, about four in ten (42 percent) Millennials are optimistic their financial situation will improve in 2022, much higher than Gen X (22 percent) or boomer (18 percent) 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,” added LaVigne. “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.”

*Allianz Life Insurance Company of North America conducted an online survey, the 2021 Allianz Life New Year’s Resolutions Study, November 15-17, 2021 with a nationally representative sample of 1,115 respondents ages 18 years or older.

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