Volatility will continue to hit the markets in 2023 and people are worried about retirement savings. Here are 3 important takeaways from Allianz’s latest market research.

  • Americans are increasingly worried about their financial future as they worry about market volatility, inflation and recession.
  • 64% of Allianz survey respondents would rather hold cash than experience market fluctuations.
  • 40% said they were concerned about market volatility that would cause their employers to withhold qualifying contributions to their 401(k) accounts.

Most Americans are nervous about their retirement portfolios in the face of a potential recession and with inflation still raging, according to a survey by Allianz Life, and would rather save cash than risk losing money in equities.

As Americans worry about their financial future, many are ending their pension contributions and worrying about covering their day-to-day expenses, the financial services provider said Tuesday about the results of its quarterly market perception survey for the fourth quarter of 2022.

77% of survey respondents believe stocks will be volatile in 2023, prolonging the strong swings that eventually sent stocks into a bear market in 2022. Stocks have been hit hard, mostly by multiple high inflation rates for the year, prompting the Federal Reserve to raise borrowing rates quickly. from zero percent.

Here are three important takeaways from an online survey conducted in December. It has a nationally representative sample of 1,005 respondents aged 18 and over.

1. Annoyed by (401)k plans

If market volatility continues to rise through 2023, 65% of respondents said they would adjust their retirement and investment plans, up from 57% in the same period last year.

Meanwhile, 40% of Americans fear that market volatility will force their employers to withhold qualifying contributions to their 401(k) accounts. According to the nonprofit American Retirement Association, tens of millions of American workers have employer-sponsored retirement plans, and 80% of 401(k) members earn less than $100,000 a year.

2. Money is everything

Cash is attractive to Americans due to the fact that market volatility will continue.

Allianz Life said that 64% of respondents said they would rather have their money stay in cash rather than endure market fluctuations. Only 19% of survey participants said they were ready to invest now and were satisfied with the current market conditions. This figure has decreased from 29% a year ago and from 26% in the third quarter of 2022.

It’s understandable that people are worried about market risk as the new year begins, Kelly LaVigne, vice president of consumer intelligence at Allianz Life, said in a report.

However, “[this] money, although subject to a potential market downturn, will also miss out on gains when the market recovers,” he said.

3. Stress due to bills

While headline inflation in the US has eased from a peak of 9% in mid-2022, consumer prices remain high. The overall consumer price level eased to 6.5% in December, but key prices, excluding energy and food, rose as housing costs rose.

Allianz Life found that 82% of Americans are concerned that rising inflation will continue to reduce the purchasing power of their income over the next six months. Concern about inflation prompted 55% of respondents to either stop or reduce their retirement savings, while 45% cut their pension savings.

At the same time, 67% said they were more concerned about paying bills than saving for retirement.

“Reducing retirement savings should be the last resort, a short-term response to inflation, because it could have a significant detrimental effect on financial security in the coming years,” LaVigne said.

The S&P 500 is up nearly 5% since the start of 2023 after falling 19% last year. Meanwhile, the so-called market indicator of fear has dipped lower. The Cboe Volatility Index, a widely monitored measure of the 30-day implied volatility of the S&P 500 Index, is down 12% this year.

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