Retirement saving is a journey: How employers can help foster ‘financial grit’ in plan participants

No one intends to reach retirement unprepared, however, life happens. A multitude of life events and financial challenges can disrupt savings. That’s why retirement planning is key. This is a primary conclusion of the recently released Retirement Survey & Insights Report 2024 from Goldman Sachs Asset Management, Planning: The Missing Link to Retirement Security.

American workers are paying a steep price for deficient financial planning, as life events often derail their saving for emergencies and retirement – leading to potentially delayed retirement and saving shortfalls.

Due to the stress of life events the survey found:

• 62% of American workers report they have less than three months of emergency savings
• 61% say they will have to delay retirement, 19% potentially for 4 years or more
• 39% of working baby boomers and 50% of Gen Xers report having less than $100,000 saved for retirement.

Yet as inflation falls, Americans with financial grit can more capably manage through their many financial challenges and focus on longer-term planning, including increasing retirement savings, according to Goldman Sachs.

“Employers can help foster ‘financial grit’ by providing access to professional resources that help employees develop a personalized financial plan and evolve that plan over time,” said Nancy DeRusso, Head of Financial Planning, Financial Wellness and SurvivorSupport for Goldman Sachs Ayco. “These types of robust benefits create accountability beyond generic plans by identifying goals that are unique to each employee’s personal situation.

“Through ongoing support and resources that highlight the small wins along the way, employees can better understand that their goals are actually achievable. Employees can see their progress and build even further resilience through targeted engagement strategies, like personalized congratulatory emails that leverage data from digital tools to highlight individual starting points and progress made over time.”

By adding financial planning and advice to defined contribution (DC) plans, employers and plan sponsors can substantially strengthen the retirement prospects of their workforce, our survey demonstrated. However, employees must be willing to use and embrace the many effective solutions their plans offer.

“Many DC plans are not retirement plans at all,” said Chris Ceder, Senior Retirement Strategist with Goldman Sachs Asset Management. “They are retirement savings accounts that often are missing the plan – a critical tool for empowering participants to achieve retirement goals.”

For too many, saving is not easy: 63% of working Americans report they are saving for multiple objectives, with 31% juggling three or more financial goals. Our survey found that workers who have conducted basic, personalized financial planning are more likely than others to have:

• Savings on track or ahead of schedule (80% with a plan vs. 39% without one)
• Increase savings each year (62% vs. 39%)
• An improved year-over-year financial situation (62% vs. 32%)
• More confidence in their ability to reach their goals (80% vs. 42%)
• More comfort managing savings (40% vs. 16%)
• Ability to navigate competing priorities (43% vs. 35%)
• Higher savings – above $200,000 (52% vs. 23%)

Related: Time are changing for retirement plans: Employees need a wealth plan too

“Developing personalized retirement plans that help workers meet the financial challenges of predictable – and unpredictable – life events is essential to success for plan participants,” said DeRusso. “It should be considered as a potential automatic feature for all workers, just like auto enrollment and escalation, since the benefits for every plan participant are vividly clear.”

“Workers with a personalized plan – we call them retirement planners – are more likely to have higher savings, be on track, and be more engaged,” Ceder said. “They have financial grit – the ability to learn, grow, sacrifice, and persevere through financial challenges. By fostering grit, we believe individuals can better navigate uncertainties and ultimately achieve their retirement goals.”