For the first time in years, an annual survey of retirement trends has found a drop in confidence with fewer Americans reporting they’re on track with savings.
That was just one of the findings in the comprehensive survey by BlackRock Inc., a leading asset management firm based in New York City. “The BlackRock Read on Retirement,” formerly called “DC. Pulse,” surveyed hundreds of large defined contribution plan sponsors, workplace and independent savers, and retirees, between March and April of this year.
Perhaps not surprisingly, inflation was a top concern among both plan sponsors and participants, and interest is high in exploring other solutions to generate income.
About 63% of those surveyed said they were on track with retirement savings but that was a substantial dip from previous years when confidence was higher. A high percentage said hardships related to the pandemic set them back and almost a quarter of the savers said they were not earning enough to save adequately for retirement.
“While it’s encouraging to see double-digit savings rates across every generation, we have work to do to help more Americans reach retirement with dignity and on their own terms – particularly those without access to employer savings plans, and women and people of color,” said Anne Ackerley, head of retirement at BlackRock.
Among the most illuminating aspects of the survey were the differences in retirement approaches and opinions among varying generations. More than a third of Gen Z respondents (those aged 25 and under) said they estimated they need an amount under $250,000 saved for a comfortable retirement. Meanwhile, half of the boomers (those aged 58 to 67) say they need to save $1 million to $3 million, for retirement, at least four times the amount Gen Z thinks it needs.
The Gen Zs are willing to save less for retirement if faced with other big ticket goals, but its average reported savings rate of 14% is similar to current savings rates of other generations.
“Gen Z imagines needing a smaller nest egg and is willing to pull back to achieve other financial milestones.” — BlackRock retirement survey
“They may need further guidance to understand what those goals require, though,” the survey concluded. “Gen Z imagines needing a smaller nest egg and is willing to pull back to achieve other financial milestones.”
The average Gen Z member expects to retire around 63 or 64 years-old, the survey found, compared to boomers who plant to retire at 65.9 on average.
Other findings included:
• There is a generational difference in retirement confidence. A high percentage of millennials (19%) and Gen X (22%) reporting they are not on track for retirement compared to Boomers (12%). Plan sponsors are also concerned about retirement readiness, and report that, on average, only 58% of their employees are on track for retirement, down from 63% in 2021. Gen Z, who was included in the survey for the first time this year, reported the highest level of confidence (69%) in their retirement outlook.
• Interest in retirement income is higher than ever, with 87% of workplace savers willing to invest a portion of their retirement savings in exchange for guaranteed regular income payments (up from 71% last year). Similarly, 74% of employers said that retirement income has become more important for their employees, and 90% agreed that plan participants would benefit from a target date fund (TDF) that generates guaranteed retirement income.
• Savers without access to a workplace retirement plan are most at risk of being unprepared for retirement, with 46% reporting they are holding at least some of their savings just in cash, missing out on wealth-generating opportunities. This group also reported low familiarity with common retirement vehicles such as TDFs (41%), but when given a description of these vehicles, 66% reported high interest, highlighting a key opportunity for investment education.
• Women and diverse communities show differing levels of retirement confidence. Only 53% of women said they feel on track with their retirement savings, compared to 63% of all workplace savers, and 73% of men. Among diverse groups, sentiment varies, with 65% of Black/African Americans, 57% of Hispanic/Latino respondents and 51% of Asian/Pacific Islander respondents saying they are on track for retirement.
• Younger workers are saving more but need guidanceon goal setting. Gen Z workplace savers are heeding the retirement industry’s decades-long push to save more –
however, a third of these respondents believed that savings of under $250,000 would be sufficient to retire comfortably, signaling that this group may need more education on planning for decumulation in retirement. Gen Z showed the highest familiarity with retirement strategies such as TDFs. Likewise, 51% of millennials report that they are invested in TDFs, and of this group 38% have no plans to change their allocation – a higher percentage than any other generation.
“As we experience new market headwinds that could impact the retirement security of millions of Americans, it’s a critical time for our industry to ensure people are planning for retirement with confidence and clarity,” said Ackerley.
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].