The retirement landscape is undergoing significant changes, driven by various factors reshaping the industry. From the growing retirement savings gap to an aging workforce and evolving investment options, retirement planning is facing new challenges and opportunities.

A recent survey conducted by Principal has identified five key trends shaping the future of retirement. The survey, which polled financial professionals and employers, highlights the transformative nature of these trends, indicating that the retirement industry will experience substantial transformations by 2030. Retirement planning is changing to meet the needs of a changing demographic based on the following trends and their implications.

The five trends that will shape retirement in the future are as follows:

1. The Retirement Savings Gap:

The cost of living is rising rapidly, making it more challenging for individuals to keep up with their retirement savings. Inflation has significantly widened the retirement savings gap, impacting millennials and centennials (Gen Z) the most. Experts predict that this gap will continue to grow by 2030, although new legislation such as the SECURE 2.0 Act aims to incentivize retirement savings.

2. Aging Workforce:

The average retirement age is increasing, leading to more older Americans staying in the workforce. Factors such as financial need, the desire to keep working, and the need for health insurance coverage contribute to this trend. As a result, retirement plans must adapt to accommodate this shift, and employers are offering more comprehensive financial wellness benefits and educational programs to assist employees in making informed decisions.

3. Shift Toward Holistic Wellness in Retirement Plans:

The COVID-19 pandemic has catalyzed changes in retirement plans, with a greater focus on holistic financial wellness. Financial professionals anticipate that financial wellness offerings will increase significantly by 2030. This includes programs for emergency savings, credit counseling, and other resources to improve overall financial well-being.

4. Evolving Retirement Investments and Advice:

There is a growing preference for different types of investments, such as exchange-traded and index funds, compared to traditional defined benefit plans. As a result, investors are seeking greater control over their investments and the ability to personalize portfolios based on individual goals and risk tolerance. Experts predict that guaranteed lifetime income will also become more popular in the coming years.

5. More Personalization in Retirement Plans:

Retirement plans are moving towards offering more customizable options for employees. As traditional pensions become less common, employers provide personalization choices to help individuals tailor their investments to their needs. Technological advancements, including robo advisors and digital investment tools, will make personalized advice and strategies accessible, particularly for younger generations.

Due to the upcoming entry of a new generation into the workforce, its impact should also be considered. Gen Z workers bring preferences for online learning, fintech tools, nontraditional workplaces, benefits, and a focus on personalization. Retirement plans must adjust to accommodate this emerging generation’s needs. Additionally, inflation, student loan debt, and high housing and auto prices pose significant challenges to Gen Z’s ability to save for retirement. As the proportion of younger workers in the workforce increases, these factors will help influence retirement plans.