Workers Are Saving for Retirement Despite Challenges Amid the Pandemic

Despite six in 10 employed workers (60 percent) having made adjustments due to pandemic-related financial strain, 82 percent are saving for retirement, according to Living in the COVID-19 Pandemic: The Health, Finances, and Retirement Prospects of Four Generations, released today by nonprofit Transamerica Center for Retirement Studies (TCRS) in collaboration with Transamerica Institute.

As part of TCRS’ 21st Annual Retirement Survey of Workers, one of the largest and longest-running surveys of its kind, the new study examines the retirement outlook of Generation Z, Millennials, Generation X, and Baby Boomers. It is based on a survey of employed workers conducted in late 2020 and contains recommendations for workers, employers, and policymakers to improve retirement security.

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“Workers are weathering a public health crisis and contending with fears about the virus and vaccinations, concerns for family and friends, employment impacts, and financial setbacks,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS.

The survey findings illustrate the experiences of workers across generations that can impact their health, financial well-being, and ability to save and invest for retirement:

  • Six in 10 have made adjustments due to pandemic-related financial strain, including reducing day-to-day expenses (32 percent), dipping into savings accounts (24 percent), accumulating new credit card debt (17 percent), reducing or stopping contributions to retirement accounts (14 percent), forgoing health care (14 percent), borrowing money (13 percent), moving (nine percent), and stopping rent or mortgage payments (seven percent). Millennials, Generation Z, and Generation X (71 percent, 69 percent, 59 percent, respectively) are more likely than Baby Boomers (40 percent) to have made any adjustments.
  • Forty-three percent experienced one or more negative impacts to their employment, including reduced hours (27 percent), reduced salaries (14 percent), furloughs (10 percent), layoffs (eight percent), and early retirement (four percent). Generation Z (59 percent) is more likely to have been negatively impacted than Millennials, Generation X, and Baby Boomers (51 percent, 39 percent, and 30 percent, respectively).
  • Sixty-two percent cite paying off one or more types of debt as a financial priority. Generation Z (35 percent) is more likely to cite paying off student loans, while Millennials, Generation X, and Baby Boomers are somewhat more likely to cite credit card debt (43 percent, 42 percent, and 37 percent, respectively).
  • Emergency savings are low. Workers have only $5,000 (median) in emergency savings to specifically cover the cost of unexpected major financial setbacks. Emergency savings increase with age: Generation Z workers have saved $2,000, Millennials have saved $5,000, Generation X have saved $6,000, and Baby Boomers have saved $10,000 (medians).
  • Almost one in four are serving as caregivers. Twenty-four percent of workers are currently serving as caregivers for a relative or loved one. Millennials (30 percent) and Generation X (26 percent) are more likely than Generation Z and Baby Boomers (18 percent and 12 percent, respectively) to be caregiving.
  • Six in 10 are concerned about physical and mental health. Sixty-six percent of workers are concerned about their physical health, and almost as many are concerned about their mental health (60 percent). Generation Z and Millennials (72 percent and 70 percent, respectively) are more likely to be concerned about their mental health, compared with Generation X and Baby Boomers (59 percent and 42 percent, respectively).

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Workers Are Saving for Retirement, but Few Are “Very” Confident About Their Long-Term Prospects

“Given the magnitude of challenges workers have faced during the pandemic, it is truly remarkable that they have maintained focus on their future retirement. However, before the pandemic and today, many workers continue to be at risk of not achieving a financially secure retirement,” said Collinson.

The survey findings illustrate the retirement outlook of workers across generations:

  • Eighty-two percent of workers are saving for retirement through employer-sponsored plans, such as a 401(k) or similar plan, and/or outside the workplace. Baby Boomers (84 percent) and Generation X (84 percent) and Millennials (82 percent) are more likely than Generation Z (70 percent) to be saving. Among those saving for retirement, Generation Z started saving at age 19, Millennials at age 25, Generation X sat age 30, and Baby Boomers at age 35 (medians).
  • Loans and early withdrawals from retirement accounts are not uncommon. Thirty-four percent of workers have ever taken a loan, early withdrawal, and/or hardship withdrawal from their 401(k) or similar plan or IRA, including 25 percent who have taken a loan and 25 percent who have taken an early and/or hardship withdrawal. Millennials (44 percent) are more likely to have ever dipped into retirement savings than Generation X (33 percent), Generation Z (30 percent), and Baby Boomers (17 percent).
  • Retirement savings may be inadequate. Total household retirement savings among all workers is $93,000 (estimated median). Baby Boomer workers have the most retirement savings at $202,000, compared with Generation X ($107,000), Millennials ($68,000), and Generation Z ($26,000) (estimated medians).
  • Forty-nine percent of workers expect to work past age 65 or do not plan to retire, an expectation that is higher among older workers. Seventy-two percent of Baby Boomers either expect to or are already working past age 65 or do not plan to retire, compared with Generation X, Millennials, and Generation Z (51 percent, 37 percent, and 36 percent, respectively). One in five workers (22 percent) expects to retire later because of the pandemic, with Millennials being more likely to expect to do so (28 percent).
  • Only 24 percent are “very” confident that they will be able to fully retire with a comfortable lifestyle. Millennials (30 percent) are more likely to be “very” confident than Baby Boomers (21 percent), Generation X (19 percent), and Generation Z (16 percent). Sixteen percent of workers across generations indicate their retirement confidence has declined as a result of the pandemic.

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