Gen Z Americans were just starting their careers when COVID-19 hit in 2020. Now, three years later, the country’s youngest adults are some of the most determined savers.
New data from Northwestern Mutual’s 2022 Planning & Progress study found that Americans between ages 18 and 25 were most likely to build savings during the pandemic and begin working with an advisor than any other generation. Seven in 10 adults in the age group reported higher savings during the pandemic, and three in 10 said they did not have an advisor prior to 2020 but have either started working with one or plan to move forward.
“It’s encouraging to see the youngest generation of adults showing an inclination to plan and holding themselves to a high bar,” said Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual. “Developing a plan isn’t just the first step toward achieving your long-germ goals, it’s also what allows you to enjoy your life more along the way. With greater clarity around how to balance spending and saving, you’re able to live more in the moment and still have confidence in the future.”
While the study also showed that young adults were more confident about their careers and in their ability to achieve financial security, 74% of Gen Zers said their financial planning still needs improvement, tied with 74% of Millennials and compared to 69% of Gen Xers and 41% of Baby Boomers.
U.S. adults continue to struggle financially
While many Gen Z Americans were trying to begin their careers when COVID-19 hit in 2020, workers in other generations were struggling to pay for mortgages, childcare, or even save an adequate amount of emergency funds.
Now, even though Americans have adapted to this new normal in and out of their financial lives, their financial discipline continues to wane. Northwestern Mutual’s Planning & Progress study found that over 60% of U.S. adults say the pandemic has been highly disruptive to the way they manage their finances. Among this group, 48% say they have been able to adapt while 13% say they have not.
Additionally, 43% say they have made up for lost ground incurred financially during the first year of the pandemic, compared to 30% who say they haven’t and 27% who say they did not fall behind in 2020.
Among the 43% who have made up lost ground, 10% say they have gained it all back and more, and are now ahead of where they expected to be financially. Twelve percent say they are fully back on track financially, and 21% say they made up some of the ground lost in 2020 but are not fully back on track financially yet.
Even as others try to make back their finances from pre-pandemic times, Northwestern Mutual found most respondents are building up their personal savings, despite it being at a lower rate than in 2021. Sixty percent say they have built up their personal savings over the last two years, with the average amount of personal savings at $62,000, compared to $73,000 in 2021.
Personal and emergency savings weren’t the only reserves impacted by the pandemic either – 25% of respondents to the study said the pandemic also pushed back their retirement date.
Expected retirement income rises as savings reduce
Past findings from Northwestern Mutual have also revealed that more Americans believe they will need $1.25 million dollars to retire comfortably, up 20% since 2021. At the same time, their average retirement savings has dropped 11%, from $98,800 last year to $86,869 now, and their expected retirement age has risen to 64, up from 62.6 in 2021.
As a result, American workers are less confident in their retirement savings. More than four in ten people say they do not expect to be financially ready for retirement when the time comes, and 45% aren’t too assured with Social Security.
There is some good news, however. Previous Northwestern Mutual research found that respondents who work with an advisor feel more secured in their financial and retirement planning. Seventy-six percent of workers who speak with an advisor believe they will achieve long-term financial security, compared to 55% of those who do not work with an advisor. Similarly, 77% of those who work with an advisor feel better protected in their retirement, rivalled with 54% of respondents who forego speaking with a professional.
Additional findings from the study can be found here.
SEE ALSO:
- Americans Strive for New Normal in Retirement Planning
- $1 Million for Retirement? It’s Not Enough
- Advisors Add Big Retirement Planning Confidence Boost
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
