Younger Generations Show Greater Confidence in Retirement Planning

NEW YORK, NY, Wednesday, May 29, 2024 – As retirement planning becomes more of an individual responsibility for working Americans, different generations have varying views on their ability to save for a long and comfortable retirement, according to the latest Goldman Sachs Asset Management annual retirement report, “Diving Deeper into the Financial Vortex: The Generational Divide.” While facing the most challenges from the financial vortex, the report highlights positive momentum among Generation Z and Millennials, who are taking early steps to get their savings on track. In contrast, Generation X and Baby Boomers often report falling behind in their savings efforts and struggling to catch up before retirement, whether voluntary or not. The survey suggests that future innovations in retirement plans should focus on helping people stay on track and manage the many financial challenges that can derail their progress.

Are Retirement Plans Benefiting Younger Generations?

Survey results show progress in encouraging Americans to save early through diversified portfolios using automated, cost-effective solutions like automatic enrollment, automatic escalation, and professional asset allocation strategies. By using these and other innovations, younger generations are taking proactive steps to manage their finances better:

– 67% of Millennials and 60% of Gen Z have a personalized retirement plan.

– 69% of Millennials and 68% of Gen Z report that their savings are on track or ahead of schedule.

However, for Gen X and Baby Boomers, the 401(k) transition remains a significant challenge. Many have taken a long time to adapt to the new retirement system—some too long. As a result, 45% of Gen X and Baby Boomers report their savings are behind schedule, and the same percentage do not have personalized retirement plans. This lack of strategy means many do not know how much to save, how to invest, or when they can afford to retire.

“Studying retirement savings across generations gives valuable insight into the changing dynamics Americans face,” said Greg Wilson, Head of Retirement at Goldman Sachs Asset Management. “As the journey becomes more personal, our industry must create solutions that meet savers where they are. Enhanced education and advice to help create personalized plans should be part of everyone’s retirement plan design.”

Financial Vortex: A Hidden Challenge for Retirement Savers

The Goldman Sachs Asset Management report reveals that many people can be caught off guard by significant and unexpected changes in life priorities, such as reduced or no retirement saving during periods of caregiving for children or older family members, or job losses.

“The challenges brought by the financial vortex can change and grow as we age,” Mr. Wilson said. “To keep our retirement savings on track, we must anticipate these challenges and include them in carefully designed financial plans.”

“The path to retirement is challenging for each generation, but with better financial education, proactive measures, and strategic planning, we can all navigate these hurdles successfully,” said Chris Ceder, Senior Retirement Strategist at Goldman Sachs Asset Management.

Key findings of the Goldman Sachs Asset Management report for each generation are as follows:

Generation Z

– Off to a Good Start: With median retirement savings of $29,000, 68% of respondents believe their savings are on track or ahead of schedule. Early saving can result in 68% higher savings than starting ten years later.

– Confident and Proactive: 60% already have a personalized financial plan, particularly for goals like buying homes and cars, and saving for vacations.

– Planning Assumptions May Be Aggressive: 44% expect to retire before 60; 75% plan to retire with less than 70% of their working income; 61% expect to fund less than 50% of retirement with personal savings.

– Most Wanted Plan Enhancement: 37% of Gen Z respondents want emergency savings options, 36% seek professional financial planning and advice services, and 28% want retirement strategy education.

Millennials

– Most Impacted by the Financial Vortex: Student loans, education costs, home buying, and caring for children and parents can significantly affect retirement savings, but 69% report being on track.

– Most Likely to Have a Personalized Financial Plan: This highlights their proactive approach.

– Most Likely to Manage Their Own Retirement Savings: 52% manage their savings themselves, 25% seek advice periodically, and 11% pay a financial advisor.

Generation X

– Facing Early Retirement Challenges: Some are beginning to retire earlier than expected, mainly due to health issues or family concerns.

– Leading the Shift Away from Pensions to 401(k)s: This shift requires individuals to save and prepare for their own retirements, leading to significant changes in American retirement strategies.

Working Baby Boomers

– Retiring Later: Most target retirement between ages 65 to 69, compared to 60-64 previously. Many still feel unprepared, with only half reporting they are on schedule.

– Top Concern: Future healthcare costs, replacing inflation as the primary worry, and guaranteed income is the most desired feature to help them retire successfully.

“Plan design innovations over the past 20 years have improved retirement savings for millions,” Mr. Ceder said. “When designing the next wave of solutions, plan sponsors and advisors should consider how emergency savings, financial education, personalized planning technology, managed accounts, and guaranteed income fit in.”

“Personalized planning solutions are increasingly important to help Americans navigate the challenges of the financial vortex, now and in the future. Plan sponsors should consider these solutions in their retirement plans.”

Methodology

The findings are based on a July 2023 survey conducted by Goldman Sachs Asset Management and Qualtrics Experience Management of 5,261 US individuals. The survey included 3,673 working people (ages 21 to 75) and 1,588 retirees (ages 50 to 75) from Baby Boomer, Generation X, Millennial, and Generation Z generations.

To better understand how people make retirement savings decisions amidst competing priorities, Goldman Sachs engaged Syntoniq, a behavioral finance technology company specializing in behavioral analysis to help individuals understand financial decision-making and align their financial objectives and outcomes. Syntoniq combines research in behavioral science, social psychology, and quantitative finance to turn psychological insights into measurable value.

About Goldman Sachs Asset Management

Goldman Sachs Asset Management combines traditional and alternative investments to provide clients with a dedicated partnership focused on long-term performance. As the primary investing area within Goldman Sachs, it delivers investment and advisory services for leading institutions, financial advisors, and individuals, drawing from a global network and expert insights across every region and market. With $2.5 trillion in assets under supervision as of December 31, 2023, Goldman Sachs Asset Management aims to build long-term relationships based on conviction, sustainable outcomes, and shared success.

About Goldman Sachs

The Goldman Sachs Group, Inc. (NYSE: GS) is a leading global financial institution providing a broad range of financial services in investment banking, securities, investment management, and consumer banking to corporations, financial institutions, governments, and individuals. Founded in 1869, the firm is headquartered in New York and has offices in major financial centers worldwide.

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