Caught Up in a Vortex of Financial Challenges? You’re Not Alone

According to the most recent Retirement Survey & Insights Report from our colleagues in Goldman Sachs Asset Management, more than half (51%) of retirees say they’re living on less than half of the income they had pre-retirement. To put this into perspective, experts commonly say we may need as much as 70% of our pre-retirement income to retire comfortably.

Unfortunately, reaching retirement with enough savings may be more of a challenge than ever today.

Until the 1970s, most employee retirement plans were pension plans, funded and guaranteed by employers. But today, most employer-sponsored plans are 401(k)s, savings vehicles that put the responsibility for retirement planning squarely on the shoulders of individuals.

It’s not an easy task to plan, save and invest effectively for a comfortable retirement in today’s challenging environment of rising interest rates, high inflation and market volatility. So it’s no wonder many people fall short. And, as this report highlights, it doesn’t help that retirement isn’t the only financial priority for most of us.

Life puts many demands on our budgets. We save for retirement within a swirl of more immediate needs such as paying bills, reducing debt and saving for other large expenses. Not surprisingly, this vortex of competing financial responsibilities can have a major impact on our ability to save for the future.

Life and career events can disrupt retirement planning

The 2022 Retirement Survey reveals how common this problem is. At least half of working respondents say their ability to save for retirement was affected, at least moderately, by career and life situations many of us face: credit card debt; paying down loans; caring for and financially supporting family members; time out of the workforce for child or elder care; financial hardships or high monthly expenses.

Source: 2022 Retirement Survey, Goldman Sachs Asset Management 

In addition, 43% of workers say they’ve personally spent time away from work to care for family members, and many of these individuals had to stop saving for retirement or even withdraw some of their savings to meet expenses during this period of their lives.

And nearly half of workers (46%) say they’ve experienced a financial hardships at some point that caused them to pause their retirement saving.

Workers feel they’re falling behind, especially Gen X

About four in 10 working respondents in the survey feel their savings are behind schedule. While the younger Millennials and Gen Z are more likely to believe they are on or ahead of schedule, Generation X, in the heart of the vortex, is more likely to feel far behind.

Source: 2022 Retirement Survey, Goldman Sachs Asset Management 

Gen X, sometimes called the “sandwich generation,” are often homeowners who take on the dual role of both parents and elder caretakers, forced to juggle competing priorities while in a critical stage of saving and preparing for their own retirement. While they still have some time before retirement, the time to get their savings on track is shrinking, and many (65%) of them are stressed about the situation.

Stress fuels an appetite for education and advice

Financial stress isn’t confined to Gen X, however. These same difficult issues are already beginning to affect Millennials, and we can see the trend continuing with Gen Z.

How much to save, how to invest and how to adjust the strategy to stay on track when life takes a turn are critical considerations for savers of all ages and stages. But how do we figure out how to do all of this effectively?

The solution may be one that nearly all working respondents believe in already – not going it alone: 95% believe financial help – human-based or digital or both – is important in preparing successfully for retirement.

Source: 2022 Retirement Survey, Goldman Sachs Asset Management