‘Financial Grit’ Among Key Behaviors Overcoming Savings Vortex
The U.S. general election, inflation, and personal debt have curtailed workers from their short-term and long-term finances and savings. Yet, a new study shows that those with “financial grit”—who work with financial advisors and take advantage of financial planning benefits, can come out on top.
An annual survey out today from Goldman Sachs Asset Management, the Retirement Survey & Insights Report 2024,” finds that due to the stress of life events, 62% of workers in defined contribution (DC) plans report having less than three months of emergency savings; 61% believe they will have to delay retirement, and potentially by four years or more for 19% of them; and 38% of Baby Boomers and 50% of Gen Xers have less than $100,000 saved for retirement.
Despite having fallen in 2024, the “financial vortex” of competing priorities continues to impact 60% of working respondents who say they will need to delay retirement because of multiple monthly expenses (67%), financial hardships (61%), caring for and financially supporting family members (57%), credit card debt (55%), paying down existing loans (53%), time out of the workforce (48%), and saving for college (42%).
Unpredictable life events beyond the vortex, like having to take an early retirement or a leave an absence, can further derail finances.
However, in its survey, Goldman Sachs Asset Management notes that by adding financial planning and advice services like goal-based, personalized planning solutions, employers can achieve their workers’ retirement goals—so long as participants utilize the benefits.
“There are these whole hosts of people who need retirement planning but don’t get it,” said Chris Ceder, a senior retirement strategist at Goldman Sachs Asset Management, in a press briefing on Tuesday. “We need to stretch these assets so that they are broadly available to all.”
Below are the latest findings from Goldman Sachs Asset Management, including the different types of retirement planners, and the advantages of getting participants into a “retirement mindset.”
Advice by Planner Type
The research at Goldman Sachs Asset Management highlights the four main groups of retirement planners enrolled in workplace plans, including the do-it-yourself (DIY) planner, the passive investor, and the advice seeker, who all manage their money themselves. The research also spotlights the reliant saver, who pays a financial planner to oversee their savings.
Its analysis found that savers who seek advice tend to be more engaged, confident, and likely to increase savings overtime. According to the study, 53% of DIYers have less than $100,000 in savings compared to 12% of advice reliant savers, while 27% have over $500,000 in savings compared to 55% of advice reliant savers. Furthermore, 57% of DIYers report being on track or ahead of schedule compared to 72% of advice reliant savers, while 43% report being behind compared to 28% of advice reliant savers, further highlighting the savings gap, Goldman Sachs reports.
When looking at who is most likely to have a plan ready for retirement, 82% were advice reliant savers, 66% were advice seekers, 45% were passive investors, and 43% were DIYers.
The findings present an opportunity for plan sponsors and advisers to work with an underserved cohort—especially as 49% of DIYers say they would likely work with a personalized digital retirement planner to build a tailored retirement strategy. DIY respondents also showed greater interest in digital and/or hybrid advice services (37%), as more employers move to a multi-channel approach that mixes digital and in-person interactions when offering advice. This also includes services that offer help with budgeting, debt management, taxes and estate planning, wealth accumulation strategies, home buying, and student loan management.
“There was a period of time where everything was going very digital. As you see from some of the studies, some of that education isn’t always there to enable people to really put themselves forward,” said Nancy DeRusso, head of wellness and financial planning for Goldman Sachs Ayco. “I think what we’re really seeing is a consolidation of benefits by employers. You’ve seen this fragmentation of 401(k) providers providing advice, financial wellness providers provide advice, financial planning, stock plan administrators, etc.”
A ‘Retirement Mindset’ is Key
Goldman Sachs’ findings also highlight the behavioral and mindset differences of those who have a personalized plan for retirement and those who do not, demonstrating how outlooks can be crucial in achieving a secure retirement.
Those who engaged in retirement planning were likelier to be more future-oriented, better informed about financial matters, and more reward-oriented, Goldman Sachs found. Conversely, those with a plan were characterized as present-oriented and more likely to adjust spending behaviors. They were also more likely to seek fewer sources of education and advice but did rely on help from personal sources like family members and spouses.
Goldman Sachs underscores the vitalness of retirement planning behaviors, adding that even if participants have a plan ready, they still need to be prepared for life events that could potentially disrupt their path. It’s these positive behaviors associated with “financial grit,” like confidence, engagement, and willing to sacrifice immediate happiness for future savings, that will drive successful outcomes, said Ceder.
“Those are the moments that are just really hard to navigate and even to plan for,” he added. “That’s where, again, that grit moment becomes really important because you’re going to have to make sacrifices, you’re going to have to make decisions. Again, having that plan for retirement gives you basically that North Star so that you can balance one decision versus the impact that it will have on another, and really hoping that will give you a way to chart that course through.”
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Financial Vortex May Threaten U.S. Retirement Savings
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