Majority of Americans Now Worry About Higher Taxes on 401(k)s and IRAs

Allianz Life study finds future tax increases are top of mind alongside continued fear of an imminent market crash

Key findings:

• 72% worry that higher taxes in the future will impact their retirement income from tax-deferred accounts such as a 401(k) or IRA
• 53% worry that another big market crash is on the horizon
• 54% say they are keeping more money than they should in cash because they’re worried about a recession

MINNEAPOLIS--(BUSINESS WIRE)--As present fears about a big market crash or recession persist, Americans also are increasingly worried about taxes on retirement income from 401(k)s and IRAs increasing in the future, according to the 2023 Q3 Quarterly Market Perceptions Study from Allianz Life Insurance Company of North America (Allianz Life).

Seven in 10 Americans (72%) worry that higher taxes in the future will impact their retirement income from tax-deferred accounts such as a 401(k) or IRA.

“While paying taxes is inevitable, how much we pay in taxes will change,” said Kelly LaVigne, VP of consumer insights, Allianz Life. “And, a change in taxes can have a significant effect on your portfolio if you have not incorporated tax strategies into your financial plan and diversified across tax categories. For a goal like retirement, you want to diversify your assets across a spectrum of long-term capital gains, regular income and non-taxable income. This strategy, along with incorporating strategic tax deferral will help achieve some control over the amount or timing of taxes you will pay.”

Americans want help to reduce tax risk with 73% saying they would stop using their current financial advisor if they didn’t help effectively manage taxes on retirement income. More Gen Xers (84%) than boomers (67%) or millennials (77%) said they would stop using an advisor if they didn’t help effectively manage taxes on retirement income.

At the same time, many Americans worry about retirement income from tax-advantaged sources like Social Security. The majority (72%) of Americans say they can’t count on Social Security benefits when planning retirement income. Even more (79%), worry about the future of Medicare and Social Security.

Majority of Americans fear another big market crash

While Americans are concerned about the taxes they will have to pay in the future, right now, they worry that a big market crash is coming.

Fewer Americans now worry that a major recession is coming than all of last year. While 55% worry a major recession is right around the corner in Q3, 64% of Americans said the same in Q2. At the same time, 53% of Americans worry that another big market crash is on the horizon.

Still, this ongoing worry is leading Americans to hold more money in cash. Most Americans (54%) say they are keeping more money than they should in cash because they’re worried about a recession.

“While you might not feel like you’re losing money by holding it in cash, over the long term you will lose out,” said Kelly LaVigne, vice president of consumer insights, Allianz Life. “Money kept in cash, or in low-interest bearing accounts, isn’t keeping up with the rising cost of living. The idea is to incorporate risk management strategies that may also lower volatility into your financial strategy so that you can invest more confidently and weather market downturns over the long term.”

Millennials are most concerned about an economic downturn affecting their personal finances than Gen Xers or boomers. More than half (52%) of millennials are concerned they will be laid off because of an economic downturn in 2023, compared to 29% of Gen Xers and 25% of boomers. And, 57% of millennials say they are keeping more money that they should in cash because they’re worried about a recession, compared to 52% of Gen Xers and 46% of boomers.

Concerns about inflation are lower than they have been in a year with 70% expecting that inflation will get worse in the next 12 months. This is down from 77% last quarter.

*Allianz Life conducted an online survey, the 2023 Q3 Quarterly Market Perceptions Study in August 2023 with a nationally representative sample of 1,005 Respondents age 18+.

About Allianz Life Insurance Company of North America

Allianz Life Insurance Company of North America, one of the FORTUNE 100 Best Companies to Work For® and one of the Ethisphere World’s Most Ethical Companies®, has been keeping its promises since 1896 by helping Americans achieve their retirement income and protection goals with a variety of annuity and life insurance products. In 2021, Allianz Life provided additional value to its policyholders via distributions of more than $10.6 billion. As a leading provider of fixed index annuities, registered index-linked annuities and fixed index universal life insurance, Allianz Life is part of Allianz SE, a global leader in the financial services industry with approximately 150,000 employees in more than 70 countries. Allianz Life is a proud sponsor of Allianz Field® in St. Paul, Minnesota, home of Major League Soccer’s Minnesota United.