As more Americans begin turning 65 this year than at any other point in history, many are coming to grips with a cold reality: this is not going to be their parents' retirement.

The majority of pre-retiree investors (69%), defined as non-retired investors aged 55-65, agree that the norm of retiring at 65 doesn't apply to them, according to Nationwide's ninth annual Advisor Authority survey, powered by the Nationwide Retirement Institute. The survey also found that two-thirds (67%) of pre-retirees expect to face more challenges in retirement than their parents and grandparents.  

This stress is shifting the perception of life as a retiree, especially for those closest to retirement age. Four in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals. What's more, pre-retirees say their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.

"Many of us watched our parents and grandparents enjoy a smooth transition to a secure retirement powered by traditional pension benefits," said Eric Henderson, President of Nationwide Annuity. "Today's investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement."

Adjusting Financial Habits and Expectations

More than other cohorts, pre-retiree investors are adjusting their spending and savings habits. Four in 10 (42%) agree that managing day-to-day expenses is getting more difficult due to the cost of living. Nearly three in 10 (27%) are saving less for retirement because of inflation, and more than half (57%) believe inflation poses the most immediate challenge to their retirement portfolio over the next 12 months. 

Additionally, more than four in 10 (41%) pre-retiree investors are avoiding unnecessary expenses such as vacations, jewelry and shopping sprees to save more for retirement, compared to 34% of non-retired investors.

In contrast to previous generations, trust in traditional financial and retirement safeguards, such as Social Security, has waned. Lack of confidence in the viability of Social Security upon retirement (38%) is a significant factor influencing pre-retirees to rethink or redefine their retirement planning strategies. Over two-fifths (43%) are not counting on Social Security benefits as much as previously expected, and more than a quarter (27%) expect to receive less in benefits than previously anticipated.

Financial Professionals Guide Near-Retirement Strategy

With difficult financial choices ahead for those nearing retirement, advisors are offering actionable insights and recommendations to guide clients toward post-career financial security. Pre-retiree investors are talking with their advisors about: accumulating sufficient savings to enter or stay in retirement (49%), tax planning strategies (38%) and converting accumulated savings into retirement income (33%).

Advisors report counseling their pre-retiree clients on when to claim Social Security benefits (28%), taxes and tax planning (23%), and planning for healthcare costs in retirement (21%). Additionally, advisors are recommending their pre-retiree clients delay taking Social Security benefits (32%) to ensure maximum payment benefits in retirement, an increase from five months ago (28%).

Advisors have also amped up their efforts to incorporate strategies to protect pre-retiree clients against market risk – more than six in ten (61%) advisors are adopting strategies or annuities to do so, compared to 55% just five months ago. Annuities (79%) and diversification/non-correlated assets (77%) rank as the most popular solutions used to help clients protect their assets against market risks.

"The final years leading up to retirement are a critical time for making decisions that can carry life-long implications," Henderson said. "Financial professionals can help this group create a holistic plan for addressing factors like Social Security, healthcare, long-term care, taxes and income in retirement, topics the Nationwide Retirement Institute offers additional resources on to help facilitate conversations with clients. Good advisors can identify gaps and create plans to address them before it's too late."

For additional insights on this survey data, see our infographic.

Nationwide's ninth annual Advisor Authority study powered by the Nationwide Retirement Institute^® explores critical issues confronting advisors, financial professionals and individual investors—and the innovative techniques that they need to succeed in today's complex market.