Generations Respond Differently to Retirement Savings

Gen Xers and women reported facing multiple struggles in saving for retirement.

A new study by BlackRock finds various demographic groups hold different attitudes on their retirement savings, with many admitting to numerous anxieties.

Research from BlackRock’s 2021 “DC Pulse Survey” found that the coronavirus pandemic may have exacerbated concerns for plan participants who were already behind on their savings.

Covering more than 1,000 participants and 225 large defined contribution (DC) plan sponsors, the study found that 52% of plan sponsors kept track of short-term 401(k) loan withdrawals. Those that kept track said employees spent their 401(k) savings on emergency spending needs throughout 2020. Other effects of the pandemic, including furloughs and suspensions of company matches, devastated retirement savings for some—61% of employers noted that at least half of their employees were negatively affected in terms of retirement readiness. Fifty-two percent say more participants withdrew or borrowed from their retirement savings plan than normal due to COVID-19.

The study added that 68% of DC plan participants reported feeling like they were on track with their retirement savings in 2021; however, 47% of participants overall say the pandemic has had some adverse effect on their retirement savings.

This is especially true for members of younger generations, who believe they will not be able to enjoy the same quality of retirement as Baby Boomers and the Silent Generation, which includes people born between 1928 and 1945. The study found 76% of Millennials and 68% of Generation Xers agree that people in their generation will not have the level of retirement income that retirees used to own. Amid the skepticism over their savings, Millennials are looking at owning retirement income solutions instead, as 94% reported expressing interest in annuities.

Gen Xers were most likely to say they are unsure if they are on track with their retirement savings, with 25% revealing they are unsure and another 13% saying they are not on track. They cited the rising cost of living, not saving enough and other expenses as their top concerns.

Financial insecurity has overwhelmed Gen Xers since before the pandemic. Also known as the “sandwich generation” for the financial squeeze that simultaneously caring for parents and children has put on them, this group of workers often juggles child care, elder care and mortgages with their careers and saving for a post-career life. For many, the pandemic had knocked over any stability that grounded their financial wellness, experts say. 

Women are also facing ongoing turmoil, with 64% saying they are worried about outliving their retirement savings, compared with 55% of men. Additionally, while over half (59%) believe they are on track for retirement, this is overshadowed by 78% of men who believe the same. Eighty-four percent of women also prefer to save more now to ensure they won’t have to scale back in retirement, the study reports.

To do so, more female participants are searching for financial advisers to address their concerns, especially when it comes to managing their investments. Forty-nine percent of women say they do not know enough to manage their own investments, while 36% are not aware of target-date funds (TDFs). Instead, 50% of women reported preferring to use a professional to manage their plan.