Even as inflation, rising interest rates, and record levels of credit card debt are taking an economic toll, many Americans are still firmly committed to saving for retirement, a new study says.
“There is still progress to be made, but I am optimistic our retirement system is providing the tools and solutions that are helping individuals achieve good financial outcomes.”
Empower President and CEO Edmund F. Murphy III
Empower’s third annual study of retirement plan participant behaviors found retirement plan contribution levels remained steady at about 8% this year, and average retirement account balances increased by 11%. Even as economic challenges persist, 69% of Americans don’t plan to reduce their retirement savings account contributions, and 35% plan to increase their contributions, compared to the only 12% who plan to decrease. Overall, 68% of working Americans are confident they will be financially ready for retirement.
Many Americans have taken or plan to take positive steps to better manage their finances: 79% have created or plan to create a budget, and 56% have spoken to or plan to speak to a financial professional. Two-thirds have no plans to see assets or investments.
“Despite the economic challenges American workers are facing, it is reassuring that most are taking positive steps to pursue their financial goals,” said Edmund F. Murphy III, Empower’s president and CEO, in a statement. “There is still progress to be made, but I am optimistic our retirement system is providing the tools and solutions that are helping individuals achieve good financial outcomes.”
The study found Americans still have a lot of financial worries. Only 11% think they’re saving enough for retirement, citing needing to make ends meet, inflation, and paying back debt as their biggest barriers to saving more.
Loan and hardship withdrawals increasing
Loan and hardship withdrawals are also rising. New loans and hardship withdrawals taken in each quarter of 2023 were the highest in the past eight quarters. And 27% of Americans say they are very (10%) or somewhat likely (17%) to take out a loan or a hardship withdrawal in the next six months. Over the past year, the proportion of workplace savers taking a loan went up by 14%, and the proportion of workplace savers taking a hardship withdrawal went up by 46%.
Social Security is also on many Americans’ minds. Among all Americans, 24% don’t expect Social Security to be there when they retire. Among Gen Zers, that number increases to almost 32%.
There are also still significant preparedness gaps across genders, generations, and races/ethnicities. Men’s average retirement account balances are 50% higher than women’s, and only 29% of Hispanic women consider saving for retirement a top goal, compared to 62% of Hispanic men.
Members of all racial/ethnic groups expressed optimism about their finances, with two-thirds or more of white, Black, Hispanic, and Asian Americans saying they’re confident they will be financially ready for retirement. However, the study found major differences in 401(k) savings and investable assets, particularly among Black Americans. Almost two-thirds of Black Americans report 401(k) savings of less than $50,000, and only 17% have saved more than $100,000. Seven in 10 Black Americans report having less than $100,000 in investable assets. By contrast, assets at the upper end (over $500,000), are held by 15% of Asian Americans, 14% of white Americans, 10% of Hispanic Americans, and only 4% of Black Americans.
Generationally speaking, Gen Z is saving 43% less than Baby Boomers, and 36% aren’t maximizing their employer-matching contribution. While every other generation said saving for retirement was their top financial goal, Gen Zers said their top priority is paying off debt.
Engagement could help boost positive behaviors. Engaged workplace savers—defined in the study as those who had at least one interaction with Empower’s workplace savings site, mobile apps, call center, or advisory services—save 53% more than unengaged savers.
Check out Empower’s third annual Empowering America’s Financial Journey™ – How People Save, Invest and Get Advice (EAFJ) study here.
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