It looks like Gen X is cutting back on a lot of things to protect their financial wellbeing in the wake of rampant inflation in recent months, but one area where they are generally not cutting back is in retirement account contributions.
Recent research from State Street Global Advisors found that while more than a third (36%) of Gen X has reduced contributions to their regular savings to help weather inflation (compared to just 18% of Millennials and Boomers), a mere 5% of Gen X say they have cut back the amount they contribute to retirement accounts, compared with 18% of Millennials and 11% of Boomers.
Let that sink in for a minute. More than three times as many Millennials and twice as many Boomers have cut their retirement contributions compared to Gen X.
Driving home this finding, State Street’s Inflation Impact Survey, which reveals how inflation is influencing Americans’ spending, saving, and investing behavior, found Gen X is considerably more worried about being able to afford to retire when planned, with 59% of Gen X expressing concern over this, compared to 41% of Millennials and 31% of Boomers. Further, being able to afford expenses in retirement was also a much bigger worry for Gen X, with 56% expressing concern, versus 41% of Millennials and 44% of Boomers.
The survey found that with inflation on the rise, over two-thirds of investors (67%) are concerned about the country’s economic outlook over the next 12 months, with over half also expressing concern over market volatility (57%) and the value of their current investments eroding (59%). But State Street said it was particularly notably that Gen X—those between age 42 and 57—is significantly more concerned than Millennials or Boomers about the effects that inflation, the stock market and economy could have on their personal financial situation.
“These are challenging times for many Americans. About half of all investors believe that the lessons learned by navigating the current inflationary environment will have a lasting impact on their spending and saving habits moving forward,” said Brie Williams, head of Practice Management at State Street Global Advisors. “Making prudent financial decisions during times of uncertainty could make committing to a budget or investment discipline easier when the economy improves.”
While last year’s study found concern about rising inflation was similar across generations as of June 2021, significantly more Gen Xers (88%) indicated concern in June 2022 compared to Millennials (72%) and Boomers (70%). And 56% of Gen Xers reported worrying about maintaining their current standard of living in this year’s survey, compared to 46% of Millennials and 43% of Boomers.
“As Americans work to defend themselves against the corrosive effect of inflation on their finances, we’re encouraged to see the majority are making tradeoffs in discretionary spending, rather than sacrificing contributions to their long-term savings goals,” Williams said. “Notably, less than one-quarter of Americans were willing to curtail contributions to their retirement savings or their child’s education savings, which demonstrates a firm commitment to their long-term financial goals.”
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• Inflation Wreaking Havoc with Workers’ Retirement Saving