Knot of Financial Challenges Derails Saving for Retirement

Goldman Sachs Asset Management finds a ‘financial vortex’ of challenges in competing financial priorities is preventing participants from saving sufficiently for retirement. 

Many U.S. workers must grapple with a “financial vortex” of challenges blunting their retirement savings, research shows.

The Goldman Sachs Asset Management Retirement Survey and Report finds that every generation of respondents—Gen Z, Millennials, Gen X and Baby Boomers—face significant effects, from competing financial priorities to life events, that distract from the ability of many to save for retirement. The data shows that 53% of Baby Boomers and 51% of Gen X respondents say they are behind in saving for retirement.

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“The financial vortex is the new reality for retirement savers today,” says Mike Moran, senior pension strategist at Goldman Sachs Asset Management, in a press release. “Some challenges are common life events, such as buying a home or starting a family, but market volatility and high inflation are beyond individual control.”

Data shows that among younger workers, 34% of Millennials and 27% of Gen Z individuals say they are behind schedule in their retirement savings. Across generations, the respondents that say they are on track, are 31% of Baby Boomers, 23% of Gen X, 23% of Millennials and 34% of Gen Z, the data shows.  

The report also finds across generations, 14% of Baby Boomers say they are somewhat or ahead of schedule for retirement savings; Gen X, 22%; Millennials, 41%; and Gen Z, 38%.  

Particularly for young workers—with many years ahead to save and invest for retirement—there is time to course correct if they act now, adds Moran.   

“The longer an investor remains off-track, the larger the adjustments may need to be to fully course correct,” he says. “But more likely, we believe some will retire with insufficient savings and need to adjust their retirement lifestyle and expectations accordingly.”

The financial vortex of challenges also includes credit card debt, loans, saving for college, caring for and financial support for family members, time out of the workforce, financial hardship and monthly expenses, according to the report.

The report finds across generations workers are most acutely affected in their ability to save for retirement because of excessive monthly expenses: for Gen Z 82%, Millennials 84%, Gen X 72% and Boomers 56%.

The data shows caring for and financially supporting family members is affecting saving for retirement for 75% of Gen Z, 79% of Millennials, 63% of Gen X and 38% of Baby Boomers; while credit card debt is affecting 58% of Gen Z, 71% of Millennials, 55% of Gen X and 40% of Baby Boomers.

“Family responsibilities have forced ‘the sandwich generation’– those balancing caring for their aging parents and their own children—to deprioritize their long-term financial well-being, potentially impacting their retirement savings,” says Joe Duran, head of Goldman Sachs personal financial management. “When assuming the role of caregiver, we believe it’s important to remember that it may not have to come at the cost of your retirement goals. Having a comprehensive financial plan can alleviate the stress that comes with juggling your career, parenting obligations, and caring for an aging loved one, giving you the space and confidence to save toward a meaningful retirement and attain peace of mind.”

During the COVID-19 pandemic, 14% of working Baby Boomers, 25% of Gen X, 33% of Millennials and 32% of Gen Z respondents withdrew funds from their 401(k) plan to cover expenses and, across generations, 37% of working respondents expect the effects of the pandemic to delay their retirement, the report finds.   

The survey was conducted by Goldman Sachs Asset Management and Qualtrics Experience Management among 1,566 U.S. participants between July and August. Participants included 967 working individuals across generations.