Even in today’s economic environment, saving for retirement is still the top priority for most people. It’s also the No. 1 contributor to feeling financially resilient, according to recent research from TIAA.
And while many Americans are still prioritizing saving for retirement, the majority report falling behind, with many citing the pandemic as the reason.
Among working respondents, 91% say that saving for retirement is a current financial goal. No goal ranks higher among this demographic group.
Yet 60% of respondents report they are falling behind on retirement savings. Of those who do not feel on track with this goal, 30% say their progress has been directly affected by the pandemic.
TIAA noted it may help explain why Americans rank “how much is needed to save for retirement” as their No. 1 financial concern (34%), followed closely by “today’s cost of living” and the “cost of health care and health insurance.”
Rethinking what’s important
The survey showed that the pandemic has changed nearly 80% of Americans’ views about what is financially important.
Equal proportions say the pandemic has shifted their focus to a more short- or long-term perspective.
As a result of the pandemic, nearly two-thirds of respondents (66%) say they want to save more, 65% say they place more importance on emergency funds and 59% place more importance.
Securing long-term financial resiliency
The TIAA Financial Resiliency Survey showed a renewed focus on the components of a financial plan that can help secure long-term financial security.
According to the survey, the majority of Americans define financial resiliency by succeeding on the following four goals:
- Increasing retirement savings: Saving for retirement is a top contributor to financial resilience, yet many report feeling off-track. Despite their uncertainty, retirement remains a top financial priority for many as they balance short- and long-term financial pressures.
- Having a source of guaranteed lifetime income in retirement: Individuals identified guaranteed lifetime income in retirement as the second-greatest contributor to financial resiliency. The majority (9-in-10) agree that once they reach retirement, it will be important to have a source of income that will not run out as they age. Of those who have guaranteed lifetime income, 7-in-10 say that knowing income will be there for them in retirement has made them feel more financially resilient throughout the COVID-19 pandemic. Those who have a source of guaranteed lifetime income are also more likely to feel positive about their finances looking forward over the next year: 64% mention an emotion like optimistic, calm, or content when looking ahead vs. just 51% of those who do not have a source of lifetime income.
- Building an emergency savings fund: Prior to the pandemic, 69% of respondents reported having emergency savings, with 47% believing those funds would cover 6+ months of expenses. Despite ongoing financial hardships, 77% of individuals now report having emergency savings.
- Paying down debt: Debt is common for many individuals today. More than 80% of respondents say they have some form of debt, with credit card debt as the most common (52%). But, nearly one-quarter of Americans say they have four or more different types of debt and among those, a quarter reported taking on new debt amid the pandemic. This number increases to 4-in-10 for those under 40 years old. The impact of debt on long-term savings is immense; while 55% of Americans who report having “easily manageable” debt say they are on track to save for retirement, the same is true for only 24% of those whose debt is “just manageable” and only 6% of those with “unmanageable” debt.
Interestingly, the emphasis people give each of these components shifts over the course of one’s life. Younger individuals value all four of these goals similarly, with debt repayment narrowly atop the list.
The importance of an emergency fund grows from there, peaking between ages 40-49. And, as people shift into their 50s and 60s, financial resiliency becomes much more synonymous with retirement security.