The declines in the stock market, surging inflation and rising interest rates have eroded investors’ confidence about their retirement, according to a new report by Janus Henderson Investors.
A total of 45% of investors said they felt less confident in their ability to have enough money to live comfortably throughout retirement, and 9% have hired or planned to hire a financial adviser in 2022, according to Janus Henderson’s 2022 Retirement Confidence Report.
According to the report, 86% of survey respondents are concerned or very concerned about inflation and 79% are concerned or very concerned about the stock market.
“With both stocks and bonds posting three consecutive quarters of negative returns in 2022, investor confidence has suffered, but it hasn’t collapsed,” said Matt Sommer, head of Janus Henderson Investors’ defined contribution and wealth adviser services team.
Yet despite these concerns, just 13% of investors have moved money out of stocks or bonds and into cash. Instead, investors appear to be tightening their budgets, as nearly half (49%) said they have reduced their spending or plan to reduce spending as a result of the financial markets and rising inflation, the report found.
“The Covid-19 stock selloff and quick comeback that occurred in 2020 put a spotlight on the challenges of timing the markets and remains a vivid example of the importance of creating and sticking to a plan in all types of markets,” Sommer said. “The good news is that many investors are taking the common-sense approach of reducing their spending and not moving out of stocks in response to this year’s challenging market environment.”
The majority of respondents (60%) believe the S&P 500 index will be higher one year from now, while 26% believe the index will be lower, and 14% expect it will be relatively unchanged.
The preferred investments for generating income in retirement in the current environment include dividend-paying stocks (65%), annuities (24%), taxable bonds (23%), and tax-free bonds (23%).
The survey was conducted by Janus Henderson with investors aged 50 and older. The sample consisted of 1,926 investors who completed the full survey.