COVID caused a massive hit to retirement planning for many American workers, but how did the four major generations currently in the workplace respond, and how are they progressing overall?
Seventy-six percent of workers say their life priorities changed because of the pandemic, and 56% cite saving for retirement as a financial priority, according to a new report from Transamerica Center for Retirement Studies (TCRS).
“Today’s workers are emerging from a pandemic and navigating megatrends such as population aging, increases in longevity, workforce disruptors, and concerns about Social Security,” TCRS CEO and president Catherine Collinson said in a statement. “Despite an unclear future, workers of all ages are envisioning and saving for an active and purposeful retirement—but are they adequately preparing?”
Here’s how they stack up, according to TCRS.
Baby Boomers (Born 1946 to 1964)
Many Baby Boomers were already mid-career when the retirement landscape began shifting from traditional defined benefit pension plans toward 401k or similar plans. They started saving at an older age than younger generations and have not enjoyed the same long-term time horizon to grow their investments. Emerging from the pandemic, Baby Boomers have been susceptible to employment risks, volatility in the financial markets, and increasing inflation – all of which could disrupt their retirement plans.
Forty percent of Baby Boomer workers expect Social Security to be their primary source of retirement income. Eighty-three percent are saving for retirement in an employer-sponsored 401k or similar plan and/or outside the workplace. They began saving at age 35 (median). Those participating in a 401k or similar plan contribute 10% (median) of their annual pay. Baby Boomer workers have saved $162,000 (estimated median) in total household retirement accounts but only $15,000 (median) in emergency savings.
Almost half of Baby Boomer workers (49%) expect to or already are working past age 70 or do not plan to retire.
Generation X (Born 1965 to 1980)
Only 22% of Generation X workers are “very” confident they will be able to fully retire with a comfortable lifestyle, and just 28% “strongly agree” they are building a large enough retirement nest egg. Seventy-eight percent are concerned that Social Security will not be there for them when they are ready to retire.
Eighty-one percent are saving for retirement in an employer-sponsored 401k or similar plan and/or outside the workplace. Generation X began saving at age 30 (median). Those participating in a 401(k) or similar plan contribute 10% (median) of their annual pay. They have saved $87,000 (estimated median) in total household retirement accounts but only $5,000 (median) in emergency savings.
Generation X workers seek to extend their working years with more time to save. Thirty-eight percent expect to retire at age 70 or older or do not plan to retire, and 55% plan to work in retirement. They have an opportunity to set forth goals: Only 27% have a financial strategy for retirement in a written plan.
Millennials (Born 1981 to 1996)
Most Millennial workers (84%) say their life priorities have changed due to the pandemic, and 68% are concerned about their mental health. Thirty-four percent were unemployed at some point during the pandemic for various reasons. Six in 10 cite paying off debt as a financial priority (60%).
Three in four Millennial workers (76%) are saving for retirement in a 401k or similar plan and/or outside the workplace. They began saving at age 25 (median). Those participating in a 401k or similar plan contribute 15% (median) of their annual pay. Millennial workers have saved $50,000 (estimated median) in total household retirement accounts but just $3,000 (median) in emergency savings.
Fifty-two percent expect their primary source of retirement income to be self-funded savings, including 401ks, 403(b)s, and IRAs (40%) or other savings and investments (12%). Seventy-three percent are concerned that Social Security will not be there for them when they are ready to retire.
Generation Z (Born 1997 to 2012)
Generation Z entered the workforce shortly before COVID-19 when unemployment rates were at historic lows, then skyrocketed at the onset of the pandemic, and have since returned to lows as workers have been reluctant to return to the workforce. Despite this tumultuous start to their careers, Generation Z will have even greater access to 401(k)s and workplace retirement plans than their predecessors.
The pandemic has been especially difficult for Generation Z workers. Fifty-nine percent often feel anxious and depressed. Fifty-two percent experienced one or more negative impacts on their employment, ranging from layoffs and furloughs to reductions in hours and pay. Fifty-one percent have trouble making ends meet. Yet, they have not given up on retirement.
Sixty-seven percent of Generation Z workers are saving through employer-sponsored 401ks or similar retirement plans and/or outside the workplace – and they started saving at the unprecedented young age of 19 (median). Those participating in a 401k or similar plan contribute 20% (median) of their annual pay.
Generation Z workers have saved $33,000 in total household retirement accounts but only $2,000 in emergency savings.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
