Running the numbers: How each generation is saving for retirement
"After everything workers have been through – employment setbacks, financial setbacks – they are still saving for retirement," says Catherine Collinson, CEO and president of Transamerica Institute and TCRS.
Many workers are struggling with financial security, made even more pronounced by the COVID-19 pandemic – though most are still saving something for retirement, according to the report, Living in the COVID-19 Pandemic: The Health, Finances, and Retirement Prospects of Four Generations by the nonprofit Transamerica Center for Retirement Studies (TCRS), in collaboration with Transamerica Institute.
82 percent continue to contribute
A majority (60 percent) of the 3,109 workers surveyed had to make one or more adjustments to their finances due to the pandemic, including reducing day-to-day expenses, dipping into savings accounts and accumulating new credit card debt. Still, 82 percent of the respondents continue to contribute to either to their employer-sponsored plans or an outside account – or both.
“It’s truly remarkable that after everything workers have been through – employment setbacks, financial setbacks – they are still saving for retirement,” says Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “Keeping their eye on the future.”
Baby boomers (84 percent), Gen Xers (84 percent) and millennials (82 percent) are more likely than Gen Zers (70 percent) to be saving – though the younger generation started saving at an earlier age than their older cohorts, according to the survey.
Among those saving for retirement, Gen Zers started saving at age 19 on average, millennials at age 25, Gen Xers at age 30, and baby boomers at age 35 on average.
$93,000 median household savings
The median total household retirement savings among all workers is estimated to be $93,000.
As expected, baby boomers have the most retirement savings, estimated at $202,000 on average, compared with Gen Xers ($107,000), millennials ($68,000) and Gen Zers ($26,000). Still, the survey shed light on the need for more financial security among many of the respondents, which was exacerbated by the pandemic.
More than four in 10 workers felt pandemic’s financial hurt
More than four in 10 workers (43 percent) have experienced one or more negative impacts to their employment due to the pandemic, including reduced hours (27 percent), reduced salaries (14 percent), furloughs (10 percent), layoffs (eight percent) and retiring early (4 percent).
Gen Zers (59 percent) are more likely to have been negatively impacted than millennials, Gen Xers and baby boomers (51 percent, 39 percent and 30 percent, respectively).
Six in 10 of all of the respondents have made adjustments due to pandemic-related financial strain, including reducing day-to-day expenses (32 percent), dipping into savings accounts (24 percent), accumulating new credit card debt (17 percent), reducing or stopping contributions to retirement accounts (14 percent), forgoing health care (14 percent), borrowing money (13 percent), moving (nine percent) and stopping rent or mortgage payments (seven percent).
Millennials, Gen Zers and Gen Xers (71 percent, 69 percent and 59 percent, respectively) are more likely than baby boomers (40 percent) to have made adjustments.
$5,000 average emergency savings
Aside from the pandemic, many of the respondents are struggling with financial security, according to the survey.
Workers have only $5,000 on average in emergency savings to specifically cover the cost of unexpected major financial setbacks. As expected, emergency savings increase with age: Gen Zers have saved $2,000 on average, millennials, $5,000; Gen Xers, $6,000; and baby boomers have saved $10,000 on average.
1 in 5 expect to retire later
Thirty-four percent of workers have ever taken a loan, early withdrawal, and/or hardship withdrawal from their 401(k) or similar plan or IRA, including 25 percent who have taken a loan and 25 percent who have taken an early and/or hardship withdrawal.
Millennials (44 percent) are more likely to have ever dipped into retirement savings than Gen Xers (33 percent), Gen Zers (30 percent) and baby boomers (17 percent).
Sixty-two percent of all of the respondents cite paying off one or more types of debt as a financial priority. Gen Zers (35 percent) are more likely to cite paying off student loans, while millennials, Gen Xers, and baby boomers are somewhat more likely to cite credit card debt (43 percent, 42 percent and 37 percent, respectively).
Forty-nine percent of workers expect to work past age 65 or do not plan to retire, an expectation that is higher among older workers, according to the survey. Seventy-two percent of baby boomers either expect to or are already working past age 65 or do not plan to retire, compared with Gen Xers, millennials, and Gen Zers (51 percent, 37 percent and 36 percent, respectively).
One in five workers (22 percent) expect to retire later because of the pandemic, with millennials being more likely to expect to do so (28 percent).
Only 24 percent are “very” confident that they will be able to fully retire with a comfortable lifestyle. Millennials (30 percent) are more likely to be “very” confident than baby boomers (21 percent), Gen Xers (19 percent) and Gen Zers (16 percent).
Sixteen percent of workers across generations indicate their retirement confidence has declined as a result of the pandemic.
3 groups play a part
Employers and policymakers and workers themselves each can play a part in improving the security of workers, Collinson says.
Workers can improve their fiscal health by first creating a financial plan, Collinson says — “There is no time like the present for individuals to really take a deep dive into their financial situation, everything from expenses, budgets, saving for retirement and any debts they may have.”
Employers can enhance their workforce retirement plans, health and welfare benefits offerings, and also their business practices, which can help employees protect their finances, save for the future and manage work-life balance, she says.
Many employers have also had a difficult time navigating the pandemic and the economic impacts from it, Collinson says. Even though they may be facing tough decisions, there are still a lot more that employers can do to support workers, such as making working hours and locations more flexible, including with remote work arrangements, and also offering robust benefit packages.
“This is especially important now as we’re reading news about the anticipated ‘Great Resignation,’” she says. “With the idea of so many workers wanting to make a change, offering a very robust benefits package can really help employers gain and maintain an edge in attracting and retaining talent.”
Policymakers can implement additional reforms that expand retirement plan coverage, increase incentives for employers to offer plans and facilitate retirement savings.
“Making sure workers have financial security is best accomplished through a collective and collaborative effort among individuals, employers and policymakers,” Collinson says. “Each of these stakeholders can play a very important role in this collaboration, so that the sum can be even greater than the whole.”
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