An impressive 72% of 401k participants who changed their savings rate in the second quarter of 2021 increased their savings rate, according to just-released data from Voya Financial from its own retirement plan participant database.
The new data aligns with and supports Voya’s latest research: “Consumer Sentiment during COVID-19,” shows that more than half (63%) of Americans agree the pandemic has made them more focused on planning for retirement—a promising outlook for the future of retirement savers nationwide.
“We know the COVID-19 financial recovery is not over for many. Still, seeing that some individuals have adopted better savings habits during a time of economic setback shows us that more and more individuals are getting serious about saving for their future,” said Heather Lavallee, CEO of Wealth Solutions for Voya Financial.
“We’ve seen this increase in retirement savings across all generations. And while it’s not surprising to see Baby Boomers and Generation X saving more—as they may be earning more than younger generations—the pandemic has clearly made saving for the future a priority among all generations as both Millennials and Generation Z are also saving more,” Lavallee added. “Finding that retirement remains a priority amid this uncertainty provides a promising outlook, and that is good news.”
As a result of long-term market volatility, economic shutdowns and high unemployment rates, the pandemic created an environment of marked financial uncertainty; however, it also left an imprint on the mindset of many individuals, highlighting the continued need to prepare for future unexpected events.
According to Voya’s research, given their financial experiences over the past year, nearly three-quarters (72%) of Americans agreed they have become more of a “saver” and not a spender. When asked why they are saving more, some of the top reasons included saving vs. spending stimulus money or COVID-19 relief funds, decreased discretionary spending and an increased focus on emergency savings as COVID-19 helped open one’s eyes to the need to save more for the unexpected.
Bridging the generation gap
Voya’s research among Americans also revealed that nearly half (41%) of Millennials have been negatively impacted financially by COVID-19. Despite these impacts, the research also found that in thinking about their experiences over the past 12 months, more than half of Millennials (68%) are now more focused on planning for retirement.
And according to Voya’s own retirement plan participant data, they’re not just saying it, but they’re also putting insights into action: Of those who changed their savings rates in April 2021, a time when stimulus checks and many company bonus payouts took effect, a significant amount of Generation Z (82%) and Millennials (73%) increased their savings rates.
“While the data outlined by our own participant actions and broad consumer sentiment shows great progress, we know we are not out the woods yet, and there is still much more work to be done,” Lavallee said. “As the economy returns to ‘normal’ and individuals are provided with more opportunity for discretionary spending, prioritizing saving over spending is going to remain a critical component for future success. We can’t lose sight of the importance of saving for retirement, and employers should help support this momentum.”
Employee benefits could be a differentiator
With employer-provided benefits gaining popularity in a post-COVID-19 world, and as open enrollment season approaches, there are key opportunities for employers to keep in mind. Among working Americans, Voya’s research also found a significant amount of individuals are interested in support from their employer when it comes to improving their overall financial wellness (81%), helping them generate income in retirement (80%), providing step-by-step guidance to improve their retirement outlook (78%), and helping them navigate life and workplace events such as accident or critical illness benefits (75%).
These numbers are even higher among working Millennials seeking support to improve their overall financial wellness (83%) and guidance on improving one’s retirement outlook (85%).
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