We’ve got a classic good news/bad news scenario coming out of BlackRock’s just-released seventh annual retirement survey.
Let’s start with the good news. Savings rates across workplace plan participants were a positive finding in the research, with all generations on average contributing at least 12% of each paycheck toward their 401(k).
And surprisingly, the youngest workplace savers (Gen Z) are demonstrating the strongest retirement savings discipline. The study found this group is setting aside an average of 14% of each paycheck, compared to 12% for other generations (Millennials, Gen X, and Boomers).
Overall, over half (53%) of workplace savers are deferring at least 11% of their salary, with 34% reporting they save between 16-20% and another 19% saying they save between 11-15%.
BlackRock’s survey—The BlackRock Read on Retirement (formerly known as the BlackRock DC Pulse Survey)—found these younger workers are indeed saving more but need some serious guidance on goal setting. While Gen Z workplace savers are heeding the retirement industry’s decades-long push to save more, a third of these respondents believed that savings of under $250,000 would be sufficient to retire comfortably, signaling that this group needs more education on planning for decumulation in retirement. Another sign of that? The average age Gen Z expects to retire is at 63.6 years, earlier than Boomers who plan to retire at 65.9 on average.
Boomers are also more realistic on what they need to retire, with nearly half of Boomers saying they need a nest egg between $1 and $3 million—that’s at least four times the amount Gen Z anticipates needing.
A large gap still exists, however. BlackRock’s survey found the average workplace saver age 61+ has a retirement account balance of $449,228, and those age 51-60 have $443,778 on average. The average amount saved drops significantly from there, with ages 41-50 having $232,783 saved in a retirement account and ages 31-40 having $131,066. Ages 21-30 have saved $72,475 on average.
Inflation strikes again
Now for the bad news. Predictably, rising inflation is having a big negative impact on Americans’ confidence in retirement security. For the first time since 2019, BlackRock’s survey found a notable decline in confidence amongst savers who are participating in a workplace retirement plan.
Just 63% said they are “on track” with their retirement savings to retire with the lifestyle they want, down from 68% in 2021 and 67% in 2020. And 17% in this year’s survey said they are NOT on track—a big increase from 10% saying the same last year.
The top reasons workplace retirement savers gave for not feeling on track? 23% said they are not earning enough to save, and 17% cited the high cost of living expenses. Overall 42% of workplace savers say hardships related to the pandemic have set them back.
Inflation is a key driver for the decline in confidence, and nearly all (87%) workplace savers reported they are concerned about inflation impacting their retirement. These savers also report a decrease in spending on big ticket items (54%) and consumables (42%) as a result.
“While it’s encouraging to see double-digit savings rates across every generation, we have work to do to help more Americans reach retirement with dignity and on their own terms—particularly those without access to employer savings plans, and women and people of color.”
Anne Ackerley, BlackRock
A strong majority of plan sponsors (69%) also reported they are worried about inflation wearing down their plan participants’ retirement savings.
“As we experience new market headwinds that could impact the retirement security of millions of Americans, it’s a critical time for our industry to ensure people are planning for retirement with confidence and clarity,” said Anne Ackerley, Head of Retirement at BlackRock. “While it’s encouraging to see double-digit savings rates across every generation, we have work to do to help more Americans reach retirement with dignity and on their own terms—particularly those without access to employer savings plans, and women and people of color.”
Nearly two-thirds of respondents (64%) are also worried about their nest egg lasting throughout their lifetime—a data point that is even higher among Black/African American (75%), Asian/Pacific Islander (71%) and Hispanic/Latino respondents (67%).
Which leads into the next data point: Nearly all employers and savers (90%) said they are interested in investment options that would provide guaranteed income in retirement.
Indeed, interest in retirement income is higher than ever, with 87% of workplace savers willing to invest a portion of their retirement savings in exchange for guaranteed regular income payments (up from 71% last year.) Similarly, 74% of employers said that retirement income has become more important for their employees, and 90% agreed that plan participants would benefit from a target date fund (TDF) that generates guaranteed retirement income.
More key findings
• Savers without access to a workplace retirement plan are most at risk of being unprepared for retirement, with 46% reporting they are holding at least some of their savings just in cash, missing out on wealth-generating opportunities. This group also reported low familiarity with common retirement vehicles such as TDFs (41%), but when given a description of these vehicles, 66% reported high interest, highlighting a key opportunity for investment education.
• Women and diverse communities show differing levels of retirement confidence. Only 53% of women said they feel on track with their retirement savings, compared to 63% of all workplace savers, and 73% of men. Among diverse groups, sentiment varies, with 65% of Black/African Americans, 57% of Hispanic/Latino respondents and 51% of Asian/Pacific Islander respondents saying they are on track for retirement.
The BlackRock Read on Retirement survey includes 305 large plan sponsors (plans had at least $300 million in assets), 1,308 workplace savers, 1,300 independent savers, and 300 retirees. Conducted by independent research company Escalent, Inc., the survey was conducted between March 25 and April 30.
SEE ALSO:
• BlackRock on TikTok: How Financial Firms are Targeting the Next Generation of Investors
• Workforce Retirement Outlook Takes Pandemic Hit
• Comfortable Retirement Optimism Drops. Here’s Why
• 401k Savers ‘Stay the Course’ Despite Market Volatility: Fidelity Q1 2022 Retirement Analysis
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
