Economic confidence among many Americans is dropping in the
current inflationary environment, with perceived financial health down from the
start of 2021 but a top priority in 2022, a new survey finds.
According to a new annual Wealth & Wellness Index
published by Empower Retirement and Empower affiliate Personal Capital, only
34% of Americans surveyed say they are “very financially healthy,” a drop of
14% from March 2021. The survey also found that economic confidence among
respondents remains relatively low at 40%, down 2% from a year ago and 12% from
the start of the COVID-19 pandemic.
In many cases,, progress toward major financial milestones
moved from “achieved” to “a work in progress.” When asked about their ability
to save consistently, the level dropped from 45% of respondents in the first
quarter of 2021 to 35% by the fourth quarter. Similarly, responses in relation
to their “ability to retire when I want” dropped from 41% to 35% during 2021.
Americans are also apparently lowering their expectations
for how much they need to save. When asked about how much savings they need to
be financially healthy, 53% of respondents in the fourth quarter of 2021 said
they need less than $100,000, compared with 44% at the start of the year.
Similarly, only 27% said they achieved their savings goal, down from 37% in the
first quarter of 2021.
What’s causing many Americans to feel less confident in
their finances and in the economy despite positive indications at a
macroeconomic level? According to the findings, Americans are worried that
their income won’t keep pace with their increasing costs in the current
inflationary environment. In addition, debt is also of increasing concern, as
nearly half (49%) of respondents do not feel that their debt is manageable and
only 32% are debt-free (down 7% from last year).
“It’s a complicated picture to describe what’s happening to
the economy,” says Craig Birk, Chief Investment Officer at Personal Capital.
“The labor market is strong and retail growth is ticking upwards, but we’re
also dealing with recent market volatility and record high inflation. It’s
unsettling for many.”
Longer-term Optimism
Despite this relatively recent decline in confidence, survey
respondents report feeling optimistic about their longer-term financial
futures. According to the survey, 68% are confident in their ability to plan
for retirement, up from 63% in 2020, while 71% are confident in their ability
to achieve saving goals they’ve set for themselves, up from 65% in 2020.
Americans are also prioritizing their financial goals in
2022. When asked what their top New Year’s resolution was, paying off personal
debt (37%) and saving for retirement (36%) now surpass traditionally common
goals like exercising more (33%) and losing weight (28%), the study notes.
What’s more, respondents are reportedly seeking allies to
help them build financial health. Most respondents surveyed indicated that they
turn to those they know and trust for advice: friends and family, retirement
providers and financial advisors. But the biggest jump among these groups,
according to the findings, is that respondents are looking for more help from
their employer’s retirement plan provider—rising to 23% at the end of 2021 from
15% at the start of the year.
Retirement planning is also the leading financial topic
people want to learn about, according to the findings:
Retirement planning (31%)
Cryptocurrency (26%)
Security of financial accounts (25%)
Investing options, including managed accounts and TDFs (24%)
Financial advising (24%)
“The fact that paying off debt is a higher priority than
exercising shows many people want to improve their financial health, and it’s
clear that financial confidence is intrinsically linked to overall health and
wellness,” says James Burton, Personal Capital’s Chief Marketing Officer.
“Americans are seeking financial advice and we don’t see this boom in financial
planning changing anytime soon.”
The findings are based on a survey conducted by The Harris
Poll on behalf of Empower and Personal Capital from Oct. 29–Nov. 3, 2021, among
2,006 adult U.S. citizens. The study also references data from prior research,
including a survey conducted from March 23–April 8, 2021, among 2,005
respondents.
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