The Frightening Truth About Retirement Accounts in 2022

One further negative effect of inflation is that fewer people are putting money down for retirement. Everything from the cost of food, car repairs, and electricity has been impacted by inflation. Now inflation is beginning to chip away at people’s ability to save for retirement.

Morgan Stanley conducted a study on this topic; the impact of inflation on the economy has caused 62% of employees surveyed to reduce the amount of money they put away in savings, while nearly a third (31%) have reduced their 401(k) contributions. More than a quarter (26%) have reduced their debt payments.

The data makes it clear that employees are struggling to find a balance between long-term savings and immediate needs, said Anthony Bunnell, head of the retirement at Morgan Stanley at Work.

The US inflation rate eased to 8.3% in August. It reached a 41-year high of 9.1% in June and 8.5% in July.

According to the findings of Morgan Stanley’s Second Annual State of the Workplace Financial Benefits Study, members of Generation Z (74%) and millennials (68%), in comparison to their baby boomer counterparts (37%), were more likely to have reduced their contributions to their savings and retirement plans. The study findings were based on responses to a questionnaire from one thousand working individuals in the United States and six hundred heads of corporate human resources departments.

According to the findings of the poll, some of the financial difficulties that employees faced over the course of the previous year include having problems paying off debt or loans (45%), experiencing a financial crisis (44%), and depending on emergency funds (38%).

The survey also concluded that people’s professional and personal lives are affected by economic climate stress. The number of workers who attributed their poor performance to stress caused by financial concerns grew from one year to the next. In 2021, 64% of workers said that money-related stress badly impacted their work and personal lives. In 2022, 71% of workers indicated that money-related stress negatively impacted their work and personal lives. Financial stress affects millennials’ professional and personal lives more than any other group (77%), up from 69% last year.

At work, many workers struggled in silence, with nearly half of workers (47%) reporting that they have never thought to reach out or are unsure whether they can ask their employer for financial assistance.

When employees were asked what sort of retirement preparation would be most useful to them, access to a financial adviser was indicated as their top option by 52% of respondents as being the most advantageous type of retirement planning.

When it comes to keeping workers, all the human resources professionals polled agreed that assisting with retirement planning from financial specialists is a priority, with 76% of those indicating this support as either a top or high priority. Regarding choosing where to work, 93% of employees ranked assistance with retirement planning as a top priority on their list of priorities.

Many employees look to their employers for support and resources as they navigate financial challenges, said Krystal Barker Buissereth, head of financial wellness at Morgan Stanley at Work. She added that these challenges affect their professional and personal success, both day-to-day and long-term. Employers must provide employees with the resources and support they need to navigate personal financial challenges, and it is especially needed with today’s high inflation and market uncertainty. According to her, they see smart and accessible workplace benefits like financial wellness can be a lighthouse for employees to find helpful tools, financial education, and professional guidance.