American workers are feeling more optimism about their retirement finances, but that optimism may be masking underlying risks. According to the fifth annual Protected Retirement Survey from the Nationwide Retirement Institute, 79% of workers self-report a positive outlook on their retirement savings – a 14-point increase over 2024. 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 outlook comes despite uncertain market conditions. For some, the uncertainty has encouraged more active engagement: 44% of workers say they are checking their retirement account balances more frequently in recent months due to market fluctuations. However, for others, that same volatility has also prompted reactive decisions, with 48% shifting 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.

Most concerning, those who express the highest levels of confidence are more likely to make decisions that could undermine their financial futures. They are 12 points more likely to have reallocated savings to more conservative assets and 10 points more likely to have made emotional decisions about their retirement investments that they ended up regretting. These include selling at market bottom, putting too much of their portfolio in a single asset class, halting retirement contributions altogether or buying too high when markets recover. These actions run counter to long-term investment principles and reflect instinctive, rather than informed, choices.

These findings underscore a troubling reality: confidence may not be grounded in financial knowledge. In fact, fewer than half of American workers (46%) correctly understand how compound interest works – one of the most essential, foundational concepts in retirement planning. Similarly, Americans aged 50-75 averaged just 31% on a retirement literacy quiz despite expressing high confidence in their preparedness, according to a study from The American College of Financial Services.

"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 Cathy Marasco, vice president of Protected Retirement at Nationwide. "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."

"Even financially knowledgeable investors often make emotional decisions during market volatility," said Eric Ludwig, PhD, CFP®, Director of the Center for Retirement Income at The American College of Financial Services. "The solution isn't just more education, but plan designs that account for human psychology. Features like lifetime income options can help workers avoid the temptation to make reactive decisions in the first place, regardless of their knowledge level."

Employees Seek Predictability, Employers Lag Behind

Employees' desire for stability is clear in the survey findings. Most workers say they want plan features that provide predictability and protection, including auto-enrollment (73%) and automatic contribution increases (64%). Yet many don't have access to these tools according to the survey: Only 66% of private sector employers offer auto-enrollment and just 51% offer auto-increase.

When it comes to protection, like in-plan lifetime income funds, the demand among private-sector employees far outpaces what most of their employers provide. About 9 in 10 employees say they want guaranteed monthly income that lasts for life, yet less than 2 in 5 private sector employers offer such plans. While many employers cite higher employee costs as a barrier, 85% of private sector workers say they would be willing to pay more today for protected investment options.

"Our survey findings highlight the need for private employers to offer guaranteed income sources to their employees, especially with so much uncertainty around the future of Social Security. Offering solutions like lifetime income investment options within retirement plans is not just good for employees, it's good for business," added Cathy Marasco. "These features strengthen retirement readiness, which can boost employee satisfaction, ease long-term financial pressures on organizations and aid recruiting and retention. Confidence without knowledge is risky, but with the right tools, workers can build retirement security with even more confidence."

You can find information about Nationwide's protected retirement solutions here for financial professionals and here for plan sponsors.