Retirement optimism climbs, but emotion-driven investing threatens growth

American workers are feeling more optimistic about their retirement finances, but that optimism may be masking some underlying risks.

This is according to the fifth annual Protected Retirement Survey from the Nationwide Retirement Institute. 79% of workers self-reported a positive outlook on their retirement savings – a 14-point increase from last year. The share of employees who feel on track with their retirement preparedness has also risen, from 65% in 2024 to 71% this year.

This improved retirement optimism is occurring despite uncertain market conditions, the survey pointed out. For some employees, this uncertainty has encouraged more active engagement: 44% of workers said that they are checking their retirement account balances more frequently in recent months because of market fluctuations.

However, for others, that same volatility has prompted reactive decisions, with 48% shifting their savings to more conservative assets, potentially sacrificing long-term growth for short-term reassurance – or locking in losses in down markets.  That number climbs to 54% among young people ages 22-34, who have longer investment time horizons.

Retirement optimism may mask underlying risks

But as the survey pointed out, this retirement optimism may be masking underlying risks.  As Cathy Marasco, leader of Protected Retirement at Nationwide explained, “while many workers say they feel optimistic about their retirement finances, our data shows that confidence doesn’t always translate into sound long-term decisions. Nearly half of respondents (48%) told us they moved their savings into more conservative investments during recent market swings and that number jumps to 54% among younger workers ages 22 to 34.”

Marasco added that for those with decades before retirement, these reactive moves may feel reassuring in the moment but can limit the long-term growth they’ll need. Market cycles often turn quickly, she pointed out. “For example,” she explained, “the S&P 500 fell 6% on April 4 but gained back 9.5% just five days later – and pulling back too soon can mean missing those rebounds. That tension between short-term comfort and long-term growth is one of the biggest hidden risks behind today’s optimism. “

A troubling reality

According to the survey, these findings underscore a troubling reality: Retirement confidence among American workers may not be grounded in financial knowledge. In fact, fewer than half of American workers correctly understand how compound interest works, which is one of the most essential and foundational concepts of retirement planning.

Similarly, Americans aged 50-75 averaged just 31% on a retirement-literacy quiz, although they expressed a high level of confidence in their preparedness, according to a study from The American College of Financial Services.

Having retirement confidence vs. being prepared

“These findings show that feeling confident isn’t the same as being prepared. Even confident investors make decisions that undermine their long-term financial security,” said Marasco. To prevent letting emotion drive decisions, workers should make sure they’re taking advantage of the best advice they can get from a financial professional or resources provided by many workplace retirement plans for those who may not have access to an advisor. They may also find security in innovative solutions that may be offered by their workplace retirement plan, like lifetime income investment options that can deliver protection without sacrificing growth, even in volatile markets.”

High confidence and emotion-driven decisions

The survey also said that workers’ higher level of retirement confidence sometimes coincides with their making more emotion-driven decisions. In sharing examples of these decisions, Marasco said that interestingly, the workers who feel the most confident about retirement are also more prone to making emotion-driven choices that can hurt them in the long run.  “They’re 10 points more likely to say they’ve acted on impulse and later regretted it, taking actions like selling at the bottom of the market, putting too much of their savings into a single asset, stopping retirement contributions altogether, or chasing returns by buying in too late after a rebound. Each of these moves may feel like the safe or smart choice in the moment, but they run against the fundamentals of long-term investing and can ultimately leave people with less savings when they need it most.”

Helping clients avoid emotion-driven decisions

To help clients avoid making emotion-driven decisions, Marasco said that advisors can be the steady hand that helps clients avoid decisions driven by fear or overconfidence.

“Our survey found that even among the most confident workers, many admitted to making emotional moves they later regretted,” she added. “Advisors can counter that by reminding clients to stay focused on their long-term goals, encouraging consistent contributions, and helping them understand the value of diversification and stress-testing their plans.”

In addition, Marasco said, there is an opportunity to help clients shift their mindset from asset accumulation to more of a focus on planning for retirement income – with many plan sponsors offering solutions that can help employees protect their assets and plan for guaranteed income in retirement, while still growing their nest egg.

“Even small, disciplined steps like increasing contributions by just 1% each year can add up to a significant difference over time,” Marasco said. “By grounding choices in a plan rather than in emotion, advisors can help clients build the confidence needed to reach their goals.”

For more insights on this survey data, see the Advisor Advocate Blog or view this infographic.

Edelman Data and Intelligence (DXI) conducted a national online 20-minute survey of n=500 private plan sponsors, n=100 public plan sponsors, and n=2,200 plan participants, on behalf of Nationwide from July 30th – August 13th, 2025.

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