COVID caused a massive hit to retirement planning for many
American workers, but how did the four major generations currently in the
workplace respond, and how are they progressing overall?
Seventy-six percent of workers say their life priorities
changed because of the pandemic, and 56% cite saving for retirement as a
financial priority, according to a new report from Transamerica Center for
Retirement Studies (TCRS).
“Today’s workers are emerging from a pandemic and navigating
megatrends such as population aging, increases in longevity, workforce
disruptors, and concerns about Social Security,” TCRS CEO and president
Catherine Collinson said in a statement. “Despite an unclear future, workers of
all ages are envisioning and saving for an active and purposeful retirement—but
are they adequately preparing?”
Baby Boomers (Born 1946 to 1964)
Many Baby Boomers were already mid-career when the
retirement landscape began shifting from traditional defined benefit pension
plans toward 401k or similar plans. They started saving at an older age than
younger generations and have not enjoyed the same long-term time horizon to
grow their investments. Emerging from the pandemic, Baby Boomers have been
susceptible to employment risks, volatility in the financial markets, and
increasing inflation – all of which could disrupt their retirement plans.
Forty percent of Baby Boomer workers expect Social Security
to be their primary source of retirement income. Eighty-three percent are
saving for retirement in an employer-sponsored 401k or similar plan and/or
outside the workplace. They began saving at age 35 (median). Those
participating in a 401k or similar plan contribute 10% (median) of their annual
pay. Baby Boomer workers have saved $162,000 (estimated median) in total
household retirement accounts but only $15,000 (median) in emergency savings.
Almost half of Baby Boomer workers (49%) expect to or
already are working past age 70 or do not plan to retire.
Generation X (Born 1965 to 1980)
Only 22% of Generation X workers are “very” confident they
will be able to fully retire with a comfortable lifestyle, and just 28%
“strongly agree” they are building a large enough retirement nest egg.
Seventy-eight percent are concerned that Social Security will not be there for
them when they are ready to retire.
Eighty-one percent are saving for retirement in an
employer-sponsored 401k or similar plan and/or outside the workplace.
Generation X began saving at age 30 (median). Those participating in a 401(k)
or similar plan contribute 10% (median) of their annual pay. They have saved
$87,000 (estimated median) in total household retirement accounts but only
$5,000 (median) in emergency savings.
Generation X workers seek to extend their working years with
more time to save. Thirty-eight percent expect to retire at age 70 or older or
do not plan to retire, and 55% plan to work in retirement. They have an
opportunity to set forth goals: Only 27% have a financial strategy for
retirement in a written plan.
Millennials (Born 1981 to 1996)
Most Millennial workers (84%) say their life priorities have
changed due to the pandemic, and 68% are concerned about their mental health.
Thirty-four percent were unemployed at some point during the pandemic for
various reasons. Six in 10 cite paying off debt as a financial priority
(60%).
Three in four Millennial workers (76%) are saving for
retirement in a 401k or similar plan and/or outside the workplace. They began
saving at age 25 (median). Those participating in a 401k or similar plan
contribute 15% (median) of their annual pay. Millennial workers have saved
$50,000 (estimated median) in total household retirement accounts but just
$3,000 (median) in emergency savings.
Fifty-two percent expect their primary source of retirement
income to be self-funded savings, including 401ks, 403(b)s, and IRAs (40%) or
other savings and investments (12%). Seventy-three percent are concerned that
Social Security will not be there for them when they are ready to retire.
Generation Z (Born 1997 to 2012)
Generation Z entered the workforce shortly before COVID-19
when unemployment rates were at historic lows, then skyrocketed at the onset of
the pandemic, and have since returned to lows as workers have been reluctant to
return to the workforce. Despite this tumultuous start to their careers,
Generation Z will have even greater access to 401(k)s and workplace retirement
plans than their predecessors.
The pandemic has been especially difficult for Generation Z
workers. Fifty-nine percent often feel anxious and depressed. Fifty-two percent
experienced one or more negative impacts on their employment, ranging from
layoffs and furloughs to reductions in hours and pay. Fifty-one percent have
trouble making ends meet. Yet, they have not given up on retirement.
Sixty-seven percent of Generation Z workers are saving
through employer-sponsored 401ks or similar retirement plans and/or outside the
workplace – and they started saving at the unprecedented young age of 19
(median). Those participating in a 401k or similar plan contribute 20% (median)
of their annual pay.
Generation Z workers have saved $33,000 in total household
retirement accounts but only $2,000 in emergency savings.
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