Only 24% of Americans are “very” confident that they will be able to fully retire with a comfortable lifestyle, confirmed a new study.
The research from non-profit Transamerica Center for Retirement Studies (TCRS) in collaboration with Transamerica Institute, found that Millennials (30%) are more likely to be “very” confident about retirement security than Baby Boomers (21%), Generation X (19%) and Generation Z (16%). In fact, many workers across all generations indicate their retirement confidence has declined as a result of the pandemic, according to the Living in the COVID-19 Pandemic: The Health, Finances, and Retirement Prospects of Four Generations report.
Additionally, although six in 10 employed workers have made adjustments due to the pandemic-related financial strain, 82% are saving for their retirement; through employer-sponsored plans, such as 401(k), and/outside the workplace. Baby Boomers (84%) and Generation X (84%) and Millennials (82%) are more likely than Generation Z (70%) to be saving. Yet, despite the fact that workers of all generations are saving for retirement, few are “very” confident about their long-term prospects.
“Given the magnitude of challenges workers have faced during the pandemic, it is truly remarkable that they have maintained focus on their future retirement. However, before the pandemic and today, many workers continue to be at risk of not achieving a financially secure retirement,” warned Catherine Collinson, CEO and President of Transamerica Institute and TCRS.
RETIREMENT PLANS & SAVINGS
The report also found that retirement savings may be inadequate. Total household retirement savings among all workers is around $93,000 (estimated median). Baby Boomer workers have the most retirement savings at $202,000; compared with Generation X ($107,000), Millennials ($68,000) and Generation Z ($26,000). As a result, around half (49%) of workers expect to work past age 65 or do not plan to retire at all; an expectation that is higher amongst older workers.
In fact, 72% of Baby Boomers either expect to or are already working past age 65 or do not plan to retire; compared with 51% of Generation X, 37% of Millennials and 36% of Generation Z. Additionally, one in five workers expect to retire later because of the pandemic, with Millennials being more likely to expect to do so (28%).
OTHER KEY FINDINGS
The report also reveal that:
- Six in 10 have made adjustments due to pandemic-related financial strain, including reducing day-to-day expenses (32%), dipping into savings accounts (24%), accumulating new credit card debt (17%), reducing or stopping contributions to retirement accounts (14%), forgoing health care (14%), borrowing money (13%), moving (9%) and stopping rent or mortgage payments (7%). Millennials, Generation Z, and Generation X (71%, 69%, 59%, respectively) are more likely than Baby Boomers (40%) to have made any adjustments.
- 43% experienced one or more negative impacts to their employment, including reduced hours (27%), reduced salaries (14%), furloughs (10%), layoffs (8%) and early retirement (4%). Generation Z (59%) is more likely to have been negatively impacted than Millennials, Generation X, and Baby Boomers (51%, 39% and 30 %, respectively).
- 62% cite paying off one or more types of debt as a financial priority. Generation Z (35%) is more likely to cite paying off student loans, while Millennials, Generation X, and Baby Boomers are somewhat more likely to cite credit card debt (43%, 42% and 37%, respectively).
- Emergency savings are low. Workers have only $5,000 (median) in emergency savings to specifically cover the cost of unexpected major financial setbacks. Emergency savings increase with age: Generation Z workers have saved $2,000, Millennials have saved $5,000, Generation X have saved $6,000, and Baby Boomers have saved $10,000 (medians).
- Almost one in four are serving as caregivers. Around 24% of workers are currently serving as caregivers for a relative or loved one. Millennials (30%) and Generation X (26%) are more likely than Generation Z and Baby Boomers (18% and 12%, respectively) to be caregiving.
IMPROVING RETIREMENT SECURITY
In short, more needs to be done to improve the retirement security of workers, highlighted Transamerica Institute and TCRS. “The pandemic has exposed weaknesses and revealed opportunities for improving retirement security. The insights gained can be applied toward effecting positive change. A concerted effort is needed among workers, employers, and policymakers,” highlighted Collinson. Each of these stakeholders could take additional steps, including:
- Workers can improve their fiscal health by creating a financial plan and gaining a full understanding of their situation. Preparing a budget, prioritising expenses, setting short- and long-term goals, learning about investing, and developing a retirement strategy are important steps.
- Employers can enhance their retirement, and health and welfare benefits offerings, as well as business practices, which can help employees protect their finances, save for the future, and manage work-life balance, while helping employers attract and retain talent in today’s highly competitive market.
- Building on recent legislation, policymakers can implement additional reforms that expand retirement plan coverage, increase incentives for employers to offer plans, and facilitate retirement savings.
“Workers’ ability to achieve a secure retirement ultimately depends on access to meaningful employment throughout their lives, the availability of retirement, and health and welfare benefits, and the preservation of safety nets such as Social Security and Medicare,” Collinson concluded. “As we emerge from the pandemic, we have an unprecedented opportunity to strengthen the fabric of our retirement system – including how we live, work, retire, and age with dignity.”
Click here for more information about the Living in the COVID-19 Pandemic: The Health, Finances, and Retirement Prospects of Four Generations report.
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