Kristi Martin Rodriguez from Nationwide® offers tips to help plan sponsors keep nervous participants engaged.
A new survey1 from the Nationwide Retirement Institute® shows consumers are fearing the worst: 68% expect a recession within the next 6 months and nearly 80% of those who do, expect it to be severe. In fact, about two-thirds (62%) of respondents believe a recession will be as severe or worse than the 2007 to 2009 Great Recession.
Because of this, consumers’ sentiment on the economy and their own financial strategy has deteriorated since 2022. Only 16% of consumers rate the U.S. economy as good or excellent today, an 8-point decline from September 2022. About 4 in 10 (39%) give a positive rating to their own personal finances, another 8-point decline from September 2022.
When it comes to managing their personal finances, consumers are most concerned about inflation or rising living costs (59%), the cost of rent or housing (34%), lack of savings for unexpected or emergency expenses (32%), managing debt (31%); health care expenses (28%), and not being on track for retirement (18%).
“It’s not surprising that people are feeling anxious,” said Kristi Martin Rodriguez, leader of the Nationwide Retirement Institute. “It’s important for plan sponsors to understand the emotions their participants are feeling right now as a first step to helping them stay focused on their long-term financial plans.”
People need help staying the course
To offset inflation, some consumers are making decisions that could be detrimental to their long-term financial strategy. More than one-third (37%) have or are considering relying more on credit cards, 24% have or are considering reducing their retirement plan contributions, and 21% have or are considering taking out a new loan. Nearly 6 in 10 (57%) consumers have used savings in the past 12 months to pay for everyday expenses. This is even higher for Gen Z and millennial consumers at 64% and 66%, respectively.
In the event of a recession, consumers’ top concerns include their ability to save in general (58%), their ability to save for retirement (52%), their retirement account losing value (52%) and their ability to retire on time (42%).
Investors are turning to alternative sources for financial advice
Despite fears and concerns about their personal finances, most consumers — especially younger ones — are turning to unproven sources for help. Seven in 10 survey respondents (70%) are not using a financial professional, citing reasons such as It costs too much (46%), they don’t have enough assets (37%), they don’t know who to go to (22%), they don’t need advice and can handle it themselves (21%), they don’t trust the financial services industry (16%) or they’re too busy (11%).
Instead of professional help, they are turning to other sources, including friends or family (48% general population, 66% Gen Z); online resources (26% general population, 34% millennials), prayer (20% general population) and social media (11% general population, 22% Gen Z).
Notably, about one-third of respondents (31%) feel ChatGPT will provide better financial advice than a human advisor within the next 5 years. This percentage is higher for younger consumers, at 37% for Gen Z and 43% for millennials.
“In moments like we’re experiencing today, plan sponsors have a huge opportunity to build deeper, trusting relationships with participants,” Rodriguez said. “There can be a real temptation for consumers to retreat or even surrender when the financial news cycle seems so challenging. The first step for plan sponsors is understanding where their participants are coming from by listening with empathy. That can set the stage for a more collaborative conversation about steps to keep them on track.”