Americans across generations face a vortex of challenges
that are hindering their ability to save, leaving many with less than 50% of
income replacement in retirement, according to an annual survey by Goldman
Sachs Asset Management.
In fact, findings from the firm’s Retirement Survey &
Insights Report 2022 show that all generations of Americans have been
significantly impacted by competing financial priorities and life events that
have derailed the ability of many to save for retirement.
The survey—which seeks to learn directly from plan
participants about their experience preparing for, transitioning to, and
managing their finances in retirement—finds that this financial vortex of
challenges includes, but is not limited to, credit card debt, paying existing
loans, saving for college, caring for and financially supporting family
members, time out of the workforce, financial hardship and too many monthly
As a result, 53% of working Baby Boomers and 51% of Gen X
respondents said they are behind in their retirement savings. Moreover, only
11% of working Baby Boomers and 12% of GenX are “very confident” in meeting
their retirement goals. Another 40% of working Baby Boomers and 32% of Gen X
respondents are just “somewhat confident,” while 30% of working Baby Boomers
and 40% of Gen X expressed concerns about meeting their goals.
Perhaps because they have a longer timeframe before planning
to retire, younger generations have brighter outlooks. Just 34% of Millennials
and 27% of Gen Z respondents report being behind schedule in their retirement
savings. Additionally, 31% of Millennials and 31% of Gen Z are “very confident”
they will meet their retirement goals, while just 19% of Millennials and 12% of
Gen X expressed concerns. Meanwhile, nearly 4 in 10 (39%) Millennials and 47%
of Gen Z respondents increased retirement savings over last year, while 32% of
Baby Boomers and 33% of Gen X decreased theirs.
“The financial vortex is the new reality for retirement
savers today,” says Mike Moran, Senior Pension Strategist at Goldman Sachs
Asset Management. “Some challenges are common life events, such as buying a
home or starting a family, but market volatility and high inflation are beyond
individual control. It’s not a question of if, but when someone will be
Moran explains that knowing how to adapt to keep retirement
savings on course is key to navigating these challenges. “The longer an
investor remains off-track, the larger the adjustments may need to be to fully
course correct. But more likely, we believe some will retire with insufficient
savings and need to adjust their retirement lifestyle and expectations,
accordingly,” he observes.
Among the reasons working respondents gave for falling
behind, 46% reported that a financial hardship caused them to stop saving for
retirement—some for three years or longer. In addition, 43% of working
respondents reported they needed to take time away from the workforce to
provide caregiving for a family member. When they did, 39% said it caused them
to use some of their retirement savings and 25% stopped saving for retirement.
Meanwhile, during the pandemic, 14% of working Baby Boomers,
25% of Gen X, 33% of Millennials and 32% of Gen Z respondents said they
withdrew money from their 401(k) plan without penalty to cover expenses. Over
half (58%) of working Baby Boomers said they would not pay back these funds
within three years, while most Gen X (65%), Millennials (81%), and Gen Z (72%)
respondents reported that they would repay their 401(k) accounts within that
To that end, 37% of working respondents expect the effects
of the pandemic to delay their retirement.
As generations age, their financial challenges inevitably
grow more complex and expensive, and their expectations around how long they
intend to work and how much they need to save for retirement may change. The
generational breakdown of the financial vortex challenges among working
Source: Goldman Sachs Asset Management
“Having dealt with life’s other financial challenges, many
retiring Baby Boomers are feeling the pinch of inadequate retirement savings,”
observes Chris Ceder, Senior Retirement Strategist at Goldman Sachs Asset
Management. “Gen X is now at the critical stage to navigate myriad short-term
goals, such as college savings, caregiving, and family life, all while keeping
their long-term savings on track.”
While many survey respondents report being behind schedule,
there is still time to adjust, adds Ceder. “However, the timeline is narrowing.
Millennials and Gen Z will be next up and currently report the highest impact
from competing priorities. Navigating these obstacles will be critical to avoid
falling behind on their savings,” he says.
Role of DC Plans and Advice
Almost all (95%) respondents consider financial
help—education, advice and counseling—important to successfully manage their
retirement savings. The top three challenges they seek advice for are:
generating income (34%);
understanding how long their savings will last (32%); and
understanding if savings are on track and, if not, how to
Employer-provided DC retirement plans are the top source of
education and advice for current workers (32%), followed by financial advisors
(31%) and family members (30%).
As for how they like to receive advice:
38% of workers said they prefer in person, phone or video
conference with a financial advisor;
34% were open to a combination of digital and human advice;
28% prefer digital or technology-based advice alone.
“Advancements in technology continue to enhance
employer-provided DC plans, giving them the power to personalize the retirement
planning experience for plan participants,” adds Ceder. “Everyone will have a
unique path to retirement and so it is increasingly important to meet them
where they are to help them reach their goal.”
The Goldman Sachs strategist further notes that they “expect
this trend to rapidly accelerate as the need for greater financial support and
market challenges—such as intense volatility, rising rates, and persistently
high inflation—elevate the risk of reaching retirement underprepared.”
The survey was conducted by Goldman Sachs Asset Management
and Qualtrics Experience Management among 1,566 U.S. participants between July
and August 2022. Participants included 967 working individuals across
generations (Baby Boomers, Generation X, Millennials and Generation Z); and 599
retired individuals aged 50-75.
Click here for the