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What’s Shaping the U.S. Retirement Landscape in 2023?

Industry Trends and Research

T. Rowe Price's new U.S. retirement market outlook examines three broad trends the firm expects to continue to shape the retirement outlook for millions of Americans who are saving and investing for retirement.

Specifically, the firm’s 2023 retirement outlook looks at the following:

  • Retirement plan access and adequacy: How employers, advisors, legislators, and regulators can help American workers get on track and stay on track with their retirement savings. 
  • Financial wellness: How employers and advisors can provide the holistic and personalized help that workers need to balance competing financial priorities across retirement, wealth, and health. 
  • The investment landscape: How employers and advisors can help workers weather market challenges to keep portfolios on track in both the saving and spending phases. 

Access and Adequacy

The first theme of retirement plan access and adequacy explores the impact of under‑saving and its contribution to the retirement savings gap. The firm’s research has shown that only half of American workers participate in an employer‑sponsored retirement plan.

Lack of access to a retirement plan is particularly acute for racial and ethnic minorities, according to the research. The firm found that, overall, only 40.5% of Black workers and 32% of Hispanic workers in the private sector participated in a retirement plan, compared with nearly 58% of their white peers.

However, that participation gap narrowed significantly when the researchers accounted for reduced access to a retirement plan among non‑white workers. Participation is higher among underrepresented communities when they are given the opportunity to participate in a workplace retirement savings plan, the paper suggests.

Meanwhile, the issue of under‑saving among those who do participate is often overlooked, the paper further notes. A recent research study by T. Rowe Price found that 38% of white 401(k) participants said they started saving before age 30, compared with only 18% of Black and 29% of Hispanic participants. More than 30% of Black and Hispanic participants who responded to their survey said they didn’t start saving for retirement until age 40 or later. To that end, the research shows that saving early and consistently can make a big difference in helping workers retire on their own terms.

As such, plan sponsors and those who help them, such as recordkeepers, financial professionals, and plan consultants, have a variety of means at their disposal to help close racial, ethnic, and gender savings gaps among participants, the firm suggests. “Not only can employers address this challenge, for many it is emerging as a key business objective,” the paper observes.

Financial Wellness

The theme of financial wellness focuses on the types of help people need. Providing access to a retirement plan and encouraging participation is only the first step, the paper notes, adding that many people need help—whether via education, guidance or advice—to navigate a complex set of retirement and other financial challenges.

T. Rowe Price’s research also confirms that workers’ retirement, wealth and health needs change over time, and this creates opportunities for better integrated solutions that can help them transition from saving to spending to help support their standards of living in retirement.

“Conversations with plan sponsors reveal converging demands to help their employees that require breaking down the silos between retirement, wealth, and planning for future health care expenses in retirement,” the paper notes.

Yet, despite the complex interaction of needs during the transition into retirement, T. Rowe Price’s research found that only 43% of retirees reported receiving help from a financial professional with their retirement planning process.

That said, the firm notes that, among its institutional clients, they are seeing retirement and wealth managers increasingly converge on the delivery of personalized financial coaching and investment advice as opportunities for differentiation and growth in their practices.

“Investor demand for holistic financial wellness advice continues to grow and we believe the many stakeholders in the retirement savings process, including financial professionals, plan consultants, and recordkeepers, will continue to evolve and innovate their services to meet the opportunity,” the paper observes.

Investment Landscape

As the final theme, the investment landscape looks at the impact of market and economic factors. “Inflation, rising interest rates, and recession concerns could be front and center issues for investors in 2023 and potentially beyond,” the paper suggests. In addition to these cyclical risks, the firm believes that investors also need to consider the possibility that global markets have reached a structural inflection point—with an end to the era of ample liquidity, low inflation and low interest rates that followed the 2008–2009 global financial crisis.

In a complex and potentially volatile market environment, T. Rowe Price suggests that plan sponsors and retirement savers may want to keep several key issues in mind, including the need for diversification, resetting expectations for fixed income, and considering the potential benefits of active management, among others.