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Survey: The Generational Divide in Retirement Savings | Diving Deeper into the Financial Vortex

Employers 06.05.2024 6 MIN

Americans’ retirement plans face a vortex of competing financial priorities, economic challenges, questions relating to Social Security’s uncertainty, increasing lifespan and healthcare costs — but not all generations are impacted equally by these factors, according to a survey from Goldman Sachs Asset Management.1

 

45% of Gen Xers’ savings behind schedule, Millennials’ savings most impacted.2

As companies examine how to support their employees' retirement planning, there may be an opportunity for a targeted approach based on generational needs.2 In The Generational Divide | Diving Deeper into The Financial Vortex, Goldman Sachs Asset Management evaluates the challenges faced by working generations and provides observations on how macro changes — like the decline in Social Security benefits, caregiving and education costs — are impacting their retirement plans. The report also reveals the top retirement-related services each generation wants from their employer.

 

Key Takeaways2

Generation Z (born 1997 – 2012)

  • Gen Z will face a unique set of challenges shaped by evolving economic conditions, increasing lifespan, potential Social Security changes, technological advances and potential shifts in societal working norms.
  • Gen Z is off to a good start, though their planning assumptions may be aggressive, with almost half expecting to retire before age 60 and three in four planning to retire with less than 70% of their working income.
  • Gen Z has lower financial literacy than other generations. Expanding financial education to improve decision making may be key to helping them achieve retirement goals.
  • Top retirement-related services or features they want from their employer:
    1. Emergency savings (37%)
    2. Professional financial planning and advice services (36%)
    3. Retirement strategy education and insights (28%)


Millennials (born 1981 – 1996)

  • When compared to all generations, Millennials are the most impacted by competing financial priorities including student loans, childcare, education costs, rising costs of home buying and caring for aging family members.
  • Millennials are proactive and of all generations, most likely to believe their retirement savings are on track or ahead of schedule. They are also most likely to have a personalized plan for retirement and other financial responsibilities.
  • Helping Millennials achieve their retirement goals may require a multifaceted approach including resources to navigate competing financial responsibilities, building an emergency savings fund and professional advice to improve financial confidence.
  • Top retirement-related services or features they want from their employer:
    1. Emergency savings (44%)
    2. Professional financial planning and advice services (35%)
    3. Retirement strategy education and insights (31%)

 

Generation X (born 1965 – 1980)

  • Gen X is the first to rely primarily on their own individual savings through 401(k)-like plans. As the “401(k) experiment” generation, Gen X saw the implementation of automatic plan features, financial education, and simplifying plan design.
  • Now, as the industry prepares for the next major phase — retirement income — Gen X will again lead the way.
  • Almost half believe they are behind schedule when it comes to retirement savings. Despite this concern, only 55% have a personalized plan for retirement.
  • Key considerations as they near retirement:
    1. Maximizing retirement savings and tax-deferred opportunities3
    2. Developing a personalized retirement strategy
    3. Factoring in future healthcare costs
    4. Considering professional advice to address financial complexities
  • Top retirement-related services or features they want from their employer:
    1. Professional financial planning and advice services (38%)
    2. Emergency savings (37%)
    3. Guaranteed income (35%)


Baby Boomers (born 1946 – 1964)

  • Baby Boomers are retiring later, with most targeting between age 65 to 69 (vs 60-64).
  • Many still feel unprepared, as only half feel they are on schedule.
  • Future healthcare spending is the top concern.
  • Half believe part-time work will be an important part of their retirement income strategy.
  • Though inflation is a concern for working Baby Boomers (30%), it is outpaced by future healthcare costs (37%) and having sufficient savings (31%).

 

46% of working Baby Boomers want guaranteed retirement income options from their employer.2

Addressing the Retirement Bubble Before it Becomes a Crisis

Goldman Sachs Asset Management’s 2023 Retirement Survey & Insights Report outlines the multitude of obstacles employees face as they prepare for retirement. In our conversations with leading CHROs, it is clear these challenges keep them up at night. At Leadership Exchange | An InnerCircle Roundtable, we convened a small group of CHROs for a collaborative discussion on how Corporate America can better prepare employees for retirement. Key themes from the dialogue included increasing financial education initiatives and empowering employee resource groups to facilitate important conversations on uncomfortable topics.

Partnering with an organization to provide financial planning, retirement tools and other educational resources can help employees better understand how all aspects of their financial wellness contribute to long-term goals. By serving as an extension of your HR team, Goldman Sachs Ayco can help your employees navigate the vortex of competing financial priorities — while helping them understand, appreciate and maximize the retirement benefits your company offers.

Interested in learning how Goldman Sachs Ayco can work to meet your organizational goals and support your employees? Contact us to learn more.

This presentation is for educational purposes only and is not a substitute for individualized professional advice. The information provided should not be construed as personal financial planning, investment, tax or legal advice.

1 Source: Goldman Sachs Asset Management’s 2023 Retirement Survey & Insights Report; Refer to the report for full disclosures.

2 Source: Goldman Sachs Asset Management’s Retirement Survey & Insights Report: The Generational Divide | Diving Deeper into the Financial Vortex; Refer to the report for full disclosures.

3 Goldman Sachs Ayco may provide tax advice to clients in accordance with its client agreement.