There are some alarming generational 401k insights in a new survey from Georgetown University, along with some troubling findings about young adults fearing long-lasting negative financial impacts from the pandemic.
The national survey of 2,280 young adults, ages 18-39, conducted by Georgetown University Business for Impact’s AgingWell Hub, part of the McDonough School of Business, found one in four young adults say the pandemic will have a lasting negative impact on them financially, while one in three Millennial parents feel financial strain and project long-term repercussions.
The survey found that 25% of adult Gen Zers (ages 18-23) and 35% of Millennials (ages 24-39) had spent savings or delayed saving or paying off debt as a result of the pandemic. The full report on the survey can be accessed here.
“It’s not just student debt but also the persistent presence of credit card debt that is impacting these two generations at every life stage,” said Diane Ty, senior partner at Business for Impact and interim director of the AgingWell Hub, who led the study. “Servicing monthly debt means less ability to start saving for retirement when time is on your side or building other assets like home ownership.”
Gen Z and Millennials lag in retirement savings, the survey found, which is troublesome as they need to start early to account for their longer life expectancy. The survey showed three in four do not have employer-sponsored retirement accounts and most do not have strong role models for building retirement savings.
Only one-third of Millennials and 7% of Gen Z reported having a retirement account. Even fewer—16% of Millennials and 5% of Gen Z—own a brokerage account for investing.
The report shows lower-income individuals are much less likely to own or have access to employer retirement savings plans and/or the ability to contribute to a plan. Just 8% of young adults households earning up to $25,000 have a retirement account, while 43% of young adult households earning $100,000+ have retirement accounts and are four times more likely to own a brokerage account.
Overconfident in parents’ retirement
Baby Boomers, ages 55-64, have a median 401k balance of $177,000 according to the report, which translates to approximately $7,112 per year in retirement, while 45% in this same age cohort have zero retirement savings. Yet the survey revealed that young adults are falsely confident about their parents’ retirement readiness and few worry about becoming full-time caregivers for their parents as they age:
- 61% of Gen Z and 62% of Millennials are confident their parents will be able to live independently
- Less than 20% believe their parents will need financial help from them
- Less than 20% envision their parents moving in with them to take care of them physically or for financial reasons
“The survey touches on a wide range of topics beyond just finances and highlights many of the challenges facing Gen Z and Millennials today and in the future,” said Lorna Sabbia, the head of Retirement and Personal Wealth Solutions at Bank of America, and survey co-sponsor. “The findings underscore the need for employers to provide a broad array of financial wellness programs to their employees that will help them navigate challenges and opportunities.”
Women less optimistic about recovery
The survey also found women were less optimistic than men on the country’s prospects for economic recovery, with 40% of men saying things will be better a year from now compared to 25% of women. Similar significant differences between genders were noted on the state of American society:
- 15% of Gen Z women are optimistic about where American society is headed compared to 24% of Gen Z men
- 19% of Millennial women are optimistic compared to 39% of Millennial men
“This survey makes clear that Millennials and Gen Z are very concerned about the impact the COVID-19 pandemic will have on their lives, both in the present moment and in the future. Transamerica has long focused on the connection between wealth and health, and we believe it is important to shine a light on the challenges younger generations expect to face moving forward,” said Kent Callahan, CEO of Workplace Solutions at Transamerica, a survey co-sponsor. “While the lack of optimism is understandable, these survey results also make clear that our role helping people achieve a lifetime of financial security is critically important, now more than ever.”
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.
