Inflation and Retirement Confidence: What Employers Can Do to Help
As inflation continues to weigh on the economy, its effects are felt in nearly every aspect of Americans’ financial lives, particularly when it comes to retirement planning. Rising prices for everyday goods and services, especially healthcare and housing costs, can lead to growing anxiety about whether today’s retirement savings will be enough tomorrow. For many workers, this uncertainty can create doubt about their financial future. Employers, however, are in a unique position to help reduce some of this stress by providing support and guidance about their retirement and financial wellness programs.
The Impact of Inflation
According to the 2025 Retirement Confidence Survey from the Employee Benefit Research Institute, over 60% of workers reported they are concerned that inflation will reduce their purchasing power in retirement. As inflation has persisted, individuals are worried their projected retirement income may not go as far as once expected. Some employees may choose to cut back on retirement contributions in favor of addressing immediate expenses, postponing retirement, or taking on greater investment risk help outpace inflation.
Reinforcing Retirement Confidence
Employers can take steps to help reinforce retirement confidence. Offering resources like workshops, webinars, or guides designed to explain how inflation could affect retirement planning can help empower employees to make more informed decisions. Information about how Social Security benefits are adjusted for inflation and how to plan for increasing healthcare costs in retirement can also help.
Beyond education, plan design can also play a role. Encouraging consistent savings, even in a tough economic climate, is essential. Automatic features like contribution escalation can help employees gradually increase their contributions. When employees know their contributions will increase every year unless they opt out, they may be more likely to build their savings over time, even if they don’t actively monitor or adjust their plans.
Employers should also consider offering investment options designed to help mitigate the effects of inflation. Diversified target date funds, which automatically adjust asset allocations over time, are a popular tool. These often include exposure to Treasury Inflation-Protected Securities (TIPS) or other inflation-sensitive assets that may help preserve purchasing power.
Develop a Financial Wellness Strategy
A broader financial wellness strategy can help reinforce retirement readiness. Many employees may be dealing with financial pressures that extend beyond their 401(k) account, such as credit card debt, student loans, and a lack of emergency savings. Financial wellness programs that offer tools for budgeting, debt reduction, and saving for short-term needs can help reduce this pressure. When employees feel in control of their day-to-day finances, they are more likely to stay focused on their long-term goals.
Employees can benefit from understanding how inflation affects their overall retirement income plan, including how Social Security, pensions, and personal savings work together. Reinforcing the importance of diversification and the risks of reacting emotionally to market volatility can help participants stay the course. With long-term care costs expected to rise in the coming years, healthcare planning should be addressed as well.
The Bottom Line
Although inflation may be outside of your employees’ control, the way they prepare for and respond to it is not. Employers who can help provide clear, practical resources and support can help employees weather economic uncertainty and stay focused on long-term security rather than short-term fears.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Patricia L. Hutchinson
Director of Retirement Plan Services
AIF®, MBA