Financial Consequences of COVID-19 Differ Across Generations

Tailored financial advice is now more vital than ever for participants at all stages of the retirement savings journey, experts say.

Art by Andrea D’Aquino

Workers aren’t just concerned about the hits to their emergency savings account during and post-COVID-19. They’re financially stressed about retirement, too. 

In response to the current crisis, Baby Boomers, Generation Xers and Millennials have shifted their viewpoints on what their financial futures will look like. According to a recent study by the Transamerica Center for Retirement Studies, about one in four workers has lost some confidence in their retirement savings since the beginning of the pandemic, and, across the three generations, this decline in confidence increased with age: 20% of Millennials now feel unsure, while 25% of Gen Xers and 32% of Baby Boomers do.

An Edelman Financial Engines study found half of the workforce has felt significant financial stress since the start of the pandemic. By April, one in three workers had already made changes to their finances, whether to their emergency savings accounts, investment allocations, personal loans or retirement accounts.

As workers turn their attention toward their income and paychecks—with many having just enough emergency savings to squeeze by—retirement is taking a backseat. This de-emphasis on defined contribution (DC) plan and pension savings creates adverse repercussions for retirement readiness.

“People are focused on the income coming in,” explains Matthew Rutledge, a research fellow at the Center for Retirement Research at Boston College.

Baby Boomers

Baby Boomers, those who are just at the cusp of retirement or who are already phasing into their post-employment years, are facing the toughest setback—with some pushing back their retirement or, in some cases, working through it. A survey by TD Ameritrade found 15% of American workers have already made the decision to pause their retirement start date, and 51% are considering balancing their income shortfall as a result of the crisis by taking a job during retirement. The Transamerica study reported that 52% of workers expect to work past age 65 or, rather, not retire at all.

Others may decide to leave the workforce sooner than they planned; Rutledge says. For example, navigating an unfamiliar work environment may drive older, experienced teachers to retire earlier or some may consider the dangers of returning to work once schools re-open to be too great. Opting for an early retirement will be the only option for some, but it may have financial consequences.

Still, offering sustainable options for employees, along with tailored educational resources and tools to get through the current market climate, can help the financial situation for all, and especially for Boomers. Offering retirement education and advice can incentivize workers to allocate money to their retirement accounts or at least to pay attention to them.

The Transamerica study found two-thirds of workers actually want more retirement education and advice from their employer. Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies, says she believes implementing tailored programs customized to age increases education and understanding.

Kelly O’Donnell, executive vice president and head of workplace at Edelman Financial Engines, believes working with a dedicated financial planner is one of the most effective tips for workers, and especially those so close to retirement. “We know that retirees and those getting close to retirement are most concerned on the market volatility,” she says. “That group has a level of complexity surrounding their retirement where they are better off working with a financial planner.”

Generation X

For those in Gen X, who are in their prime earning years, the effects of COVID-19 have also weighed on their current and future finances. Coupled with the fact that many are juggling careers and families—with some also handling home schooling and caring for aging parents—most are simply not thinking about retirement.

“It’s so critical for them to focus on the long term, and yet, of the three generations, they’re the most likely to be distracted,” Collinson says. Twenty-five percent of these workers say their confidence in retirement savings has plummeted since the start of the pandemic.

Sixty-nine percent of Gen Xers said they would like to receive information and advice from their employers on how to achieve their retirement goals. Gearing education toward the middle group, while also implementing savings programs or loan options, can substantially help. Taking advantage of DC plan loan options rather than withdrawing from retirement accounts allows participants to pay themselves back while decreasing the potential loss in savings. “The ability for workers to take out a loan and pay themselves back is a very powerful tool,” Rutledge says. “The best lender a worker can have is themselves.”


Older Millennial workers found themselves entering the workforce in the middle of the Great Recession. Once they landed a job, adding money to a DC plan was an actionable step they could take to prepare for the future, Collinson says. The median age that Millennial investors started saving for retirement was 24, while Generation Xers began their savings at 30 years old, and Boomers at age 35, the Transamerica study notes. “There is tremendous growth among Millennials’ household savings in their retirement accounts,” Collinson adds.

The Edelman Financial Engines survey found Millennials faced higher stress than other groups, as many had just begun their financial recovery from 2008’s recession. “Older Millennials were getting their footing again,” notes O’Donnell. “And now they’re moving backwards again with this crisis.”

For younger Millennial investors, the market recession due to COVID-19 has been their first real downturn, whereas Gen Xers and Boomers have survived multiple bear and bull markets. After exhausting their emergency savings—if they had any to begin with—some Millennial investors turned to their retirement accounts for more income. Advisers can turn towards education on emergency savings, believed to be one of the most important considerations for workers, and especially Millennials, going forward.

Generation Z

While the workforce has largely encompassed Boomers, Gen Xers and Millennials, it’s worthy to note a new group slowly entering the workplace: Generation Z. Just as each age group is defined through major global events—Boomers were born after World War II; Generation X following the Vietnam War and Civil Rights Movement; and Millennials at the turn of the new millennium—the events of 2020 are likely to define the youngest workforce, Collinson says.

Gen Zers, who have already been deemed as responsible savers, will likely emphasize emergency and retirement savings after witnessing the effects of the most recent crisis. A study by the Center for Generational Kinetics (CGK) found 35% of Gen Zers are planning to begin saving for retirement in their 20s. Of those already in the workforce, 88% are already actively portioning some of their income to retirement on a monthly basis, according to a Betterment for Business report. “Gen Zers are thinking about retirement and how their financial plan is performed,” Edward Gottfried, a group product manager of Betterment for Business, previously told PLANADVISER. “They feel the same financial uncertainty that those in other age cohorts are feeling.”

While Gen Zers have a long way to go until retirement, O’Donnell notes how even those starting out can benefit from the advice of a financial planner. Implementing a sidecar savings account, or other emergency savings vehicle, will aid even younger workers take ahold of their finances.

The Power of Advice

To encourage savings among all age groups, David Stinnett, principal and head of Vanguard Strategic Retirement Consulting, notes the importance of adding automatic features, such as auto-enrollment, auto-escalation and re-enrollment features, with the addition of advice. “Implementing automatic increase, defaulting people into TDFs [target-date funds] and, if you haven’t already, considering adding advice as a feature to the plan, can certainly help all generations,” he says.

For advisers, Stinnett says ensuring clients aren’t panicking, and continue to not do so, will support their financial recovery moving forward. Coming out of the pandemic, he suggests focusing on appropriate asset allocation, and aiming towards aggressive savings goals to get back on track.  

According to the Edelman Financial Engines study, more than third of U.S. workers said they would benefit from financial advice during the crisis. Plan advisers working with employers must understand the demographics of the plan, along with the needs, solutions and objectives of the employer, states O’Donnell. It’s about working with the employer and participants to determine what is essential to their experiences. “Targeting personalized messages and solutions to where people are in their financial journey is extremely important,” she continues. “For someone who can’t pay their bills or are thinking about taking out a loan, there are different solutions for them than for those who are moving their retirement egg out because of market volatility, or the possibility of losing a job in the household.”