Nationwide study: Retirement confidence up, but financial literacy lags

• Key Insight: Learn why retirement confidence is rising despite poor financial literacy and risky behaviors.  
• What's at Stake: Plan sponsors face higher benefits and labor costs from delayed retirements.  
• Forward Look: Expect greater demand and policy pressure for lifetime income and expanded auto-enrollment.
• Source: Bullets generated by AI with editorial review

American workers are feeling better about their retirement prospects — but that optimism may be giving both employees and employers a false sense of security. 

According to the fifth annual Protected Retirement Survey from the Nationwide Retirement Institute, 79% of employees report a positive outlook on their retirement savings — a 14-point increase over 2024. More employees also feel on track with their savings goals, rising from 65% last year to 71% this year.

However, this confidence doesn't always reflect sound financial understanding or behavior. While market uncertainty has pushed 44% of workers to check their retirement balances more often, many are reacting emotionally to volatility rather than strategically. Nearly half have shifted savings toward more conservative assets, locking in losses or missing potential growth opportunities. 

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This behavior is especially common among younger employees ages 22-34, with 54% moving money to safer options, despite having long investment horizons. Ironically, the workers who express the most confidence are also the most likely to make short-term, reactive moves, with these individuals 12 points more likely to have shifted investments too conservatively and 10 points more likely to regret emotional financial decisions such as pausing contributions.

Nationwide's data points to a deeper issue: Confidence does not equal competence. Less than half of American workers understand how compound interest works, and adults aged 50 to 75 scored an average of just 31% on a retirement literacy quiz from The American College of Financial Services. 

"Feeling confident isn't the same as being prepared," said Cathy Marasco, vice president of Protected Retirement at Nationwide, in a release. "To prevent emotion from driving decisions, workers need access to sound guidance from financial professionals or workplace resources, as well as innovative solutions like lifetime income investment options that protect savings without sacrificing growth."

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Financial stability a top priority for employees

Most employees say they want plan features that offer predictability and protection, such as automatic enrollment and automatic contribution increases. Yet access remains limited, as only about two-thirds of private employers offer auto-enrollment, and just over half provide auto-escalation features. 

The desire for protection is even stronger when it comes to retirement income: Nearly nine in ten employees want guaranteed monthly income that lasts for life, but fewer than two in five private-sector employers currently make these options available. While some employers cite cost concerns, 85% of workers say they would be willing to pay more today for protected investment choices, Nationwide found. 

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"The solution isn't just more education, but plan designs that account for human psychology," said Eric Ludwig, director of the Center for Retirement Income at The American College of Financial Services. "Features like lifetime income options can help workers avoid the temptation to make reactive decisions in the first place."

Rethinking retirement timelines

Market uncertainty is already prompting workers to rethink their retirement timelines. Nearly one-third of employees over age 45 have delayed their planned retirement date, and most plan sponsors report an increase in delays over the past year. Employers recognize the ripple effects, with roughly seven in ten private and public plan sponsors saying these postponements raise benefits and labor costs for their organizations.

There is at least one encouraging trend in Nationwide's research: Younger employees appear to be learning from older generations' regrets. Workers aged 22 to 34 report that they began contributing to employer-sponsored plans at age 24, compared to age 35 among those over 45. However, without better plan design and access to income-protection features, even this early start may not be enough to sustain confidence through future volatility.

Benefit managers can help close the confidence gap by integrating automatic enrollment and contribution increases to simplify saving, adding lifetime income investment options within retirement plans to provide long-term security, and ensuring that workers have access to financial guidance that helps them make informed, disciplined choices.

"Confidence without knowledge is risky," Marasco said. "But with the right tools, workers can build retirement security with even more confidence, and employers can build a stronger, more resilient workforce."