Views of Financial Resiliency Differ by Generation

Plan sponsors can address all components needed to help employees feel financially secure in employer financial wellness programs and education.

The setbacks many people have experienced in employment, pay and the ability to save during the COVID-19 pandemic might have people thinking about how to be financially resilient during trying economic times.

According to research by TIAA, nearly 60% of adults say they have experienced some kind of financial stress amid the pandemic. The survey shows that the pandemic has changed nearly 80% of Americans’ views about what is financially important.

Equal proportions of people say the pandemic has shifted their focus to a more short- or long-term perspective. Because of the pandemic, 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 on having a source of guaranteed lifetime income once they have retired.

Having more money set aside in retirement savings and having a source of guaranteed lifetime income for retirement ranked first among respondents overall as contributing to financial resiliency, selected as the top component by 22% of respondents each. This was followed by having more money set aside in an emergency fund (16% selected as No. 1 component) and paying down debt (17%).

Of those who have guaranteed lifetime income, seven in 10 say that knowing that 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 such as optimistic, calm or content when looking ahead versus just 51% of those who do not have a source of lifetime income.

Sixty-nine percent of respondents reported having emergency savings prior to the pandemic. Despite ongoing financial hardships during the pandemic, 77% of individuals report having emergency savings now. 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 say they have four or more different types of debt and, additionally, one-quarter report they have taken on new debt during the pandemic.

While all four contributors to financial resiliency were important to respondents overall, their importance differed depending on respondents’ age. Respondents ages 25 to 29 value all four similarly, but paying down debt, including student loan debt if they have it, was ranked first by 38% of the younger respondents. Those ages 30 to 39 (42%) and ages 40 to 49 (48%) placed the highest importance on having money set aside in an emergency fund. Respondents ages 50 to 59 and 60 to 70 ranked having more set aside for retirement savings first (53% and 59%, respectively), with having a source of guaranteed lifetime income for retirement a close second (45% and 50%).

Helping Employees Feel Financially Resilient

“We saw that respondents have a good understanding of what creates genuine financial resiliency, including having guaranteed lifetime income in retirement, but they very often don’t know how to translate those wants into an actionable financial plan,” Dan Keady, chief financial planning strategist at TIAA, told PLANSPONSOR. “Not surprisingly, individuals are looking for guidance from their employers, highlighting the important role employers can play in helping employees throughout their financial lives.”

Among employed respondents to the TIAA survey, 31% say they are extremely interested in saving for retirement being a topic of employer financial wellness programs and 32% said they would be very interested. This was followed by “how to achieve guaranteed lifetime income in retirement” (27% extremely interested, 29% very interested); “choosing and monitoring investments” (17%, 29%); and “how to build up an emergency fund” (18%, 24%).

Fifty-two percent of employed respondents indicated they would be not at all interested in “managing student loan debt” as a topic for employer financial wellness programs. However, other studies have shown that help with repaying student loan debt is important to many employees.

Not surprisingly, younger respondents are more interested in financial essentials such as building an emergency fund and managing bills and spending as topics to be covered in financial wellness programs, but these are less important to older respondents.

TIAA says the first step in increasing retirement savings is determining how much income a person will need in retirement to help calculate their savings goals. Offering annuities through workplace retirement plans can help with the goal of having a source of guaranteed income in retirement.

Some individuals might need to consider whether they should prioritize saving for retirement, paying down debt or creating an emergency fund. TIAA says it can be possible to set aside money for all three goals at once, though it may be more difficult for some people than for others.