Inflation has crushed retirement dreams for a third of all workers

Inflation and other financial challenges are keeping employees tethered to their careers for longer than planned, with many giving up on the hope of ever leaving the workforce. 

According to a new survey by MFS Investment Management, 63% of employees anticipate retirement involving reduced hours or a different job, instead of a clean break from their careers. Sixty-six percent have pushed back the age they hope to leave the workforce, while more than a third don't think retirement will be possible for them at all. 

"The uncertainties and disruptions over the past few years have clearly affected workplace savers," says Jeri Savage, retirement lead strategist at MFS. "People are worried about inflation, they're worried about market volatility, and all of those things. But we don't actually have insight into how much they may be saving and what their overall financial picture looks like. So there is a chance that they're actually better off than they think they are." 

Read more: 62% of women don't think they can retire because of inflation

The psychological toll of inflation on employees' financial wellness is an important consideration, and is having a negative impact on employees' mindset toward their financial well-being. Sixty-six percent of employees told MFS they lack confidence in their ability to save enough for retirement, while separate research from Charles Schwab found that 62% of employees list inflation as their biggest obstacle toward saving for retirement, up from 45% last year. 

TIAA Institute also found that a quarter of adults reduced their retirement savings because of inflation, and 12% stopped saving for retirement completely. These habits are a worst-case scenario for plan sponsors, Savage says. 

"How do you reach people when they have that negative sentiment and they stop contributing, or take their money from the plan?" she says. "Those are the behaviors that we're all looking to make sure don't happen in these times of volatility." 

Read: Financial education can help employees keep their retirement savings intact

For employers, reiterating the message to their workforce that long-term consistency is the best approach can help mitigate interruptions or changes in saving patterns, Savage says. Younger workers in particular are actually understanding the importance of long-term participation in retirement plans, though their attitude and confidence about retirement readiness is poorer than older generations, according to MFS data. 

"People under age 45, versus those over age 45, are more negative than the older cohort and they think things are all doom and gloom, but younger generations are actually saving more," Savage says. "We're doing great things in the retirement system and defaults are working and engagement is perhaps increasing. The message here, especially for younger participants in the system, is just stay invested, stay the course, continue contributing." 

And while people's ideas about what retirement will look like may be different, the same approach to supporting workers can still apply, Savage says. Education, engagement and action can help employees stay the course — and it works, she stresses. 

"I think it comes back to all the buzzwords we use in the industry: It's education, and it's engagement in education," Savage says. "Any way that a sponsor can reach their participants with the message of saving and investing in a diversified portfolio and not divesting to cash. The silver lining here is that participants are actually not that likely to take action. So even as we go through all this volatility, it's still a smaller portion of the overall population that's potentially doing damage." 

Read more: Retire at 59? Here's why Gen Z Americans think they can do it 

Access to financial advisers or other tools and programs that can personalize the savings experience are also an important part of a well-balanced approach to retirement, no matter what external financial stressors come an employee's way. 

"Everyone's unique — they all have different puzzle pieces to fit together for a successful retirement," Savage says. "Our survey data shows that those participants really want that interaction. If we really want to reach each and every individual and help them have a unique and successful retirement, that definitely includes some form of personalization and personalized advice."