Americans prioritize retirement savings after COVID-19 pandemic, survey says

Americans across four generations said the coronavirus pandemic changed their life priorities, including many who made saving for retirement a top financial goal, a new survey said.

The Transamerica Center for Retirement Studies' (TCRS) annual survey compared how the retirement outlook for baby boomers, Generation X, millennials and Generation Z has shifted since the pandemic. 

Across the four generations surveyed, 76% said their life priorities changed due to the pandemic and 56% said that they were prioritizing retirement savings. 

However, only 24% of those surveyed said that they are "very" confident they will be able to retire fully with a comfortable lifestyle and 46% said they are "somewhat" confident. Fifty-one percent of respondents said they did not believe they had enough income to save for retirement, with 53% citing debt as the reason. 

"Today's workers are emerging from a pandemic and navigating megatrends such as population aging, increases in longevity, workforce disruptors, and concerns about Social Security," Catherine Collinson, CEO and president of Transamerica Institute and TCRS, said. "Despite an unclear future, workers of all ages are envisioning and saving for an active and purposeful retirement – but are they adequately preparing?"  

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How much each generation has saved for retirement

Baby boomers saved a median of $162,000 in total household retirement accounts and $15,000 in emergency savings, the survey said. Forty percent of baby boomers said they expected Social Security to be their primary source of retirement income, while almost half (49%) of the generation's workers said they planned to work past 70.

By comparison, Gen X respondents said they saved a median of $87,000 in total household retirement accounts and $5,000 in emergency savings. Reliance on Social Security ebbed for this generation, with 78% reporting that they were concerned that it will not be there when they are ready to retire. Similar to baby boomers, 55% of Gen Xers said they planned to work into retirement.

Of the two younger generations – millennials and Gen Z workers – many said that saving for retirement was a life priority. Among millennials, 76% said that they are saving for retirement in a 401(k) or similar plan and have saved a median of $50,000 in total household retirement accounts and $3,000 in emergency savings. 

Gen Zers – the youngest generation surveyed – had the benefit of having a longer time to save and also started "saving at the unprecedented young age of 19," the survey said. Gen Z workers have saved a median of $33,000 in total household retirement accounts and $2,000 in emergency savings. 

"Emergency savings are needed to cover financial setbacks, such as unemployment, medical bills, home repairs, auto repairs, and other unexpected expenses," the survey said. "Having emergency savings could also help prevent workers from dipping into their retirement savings to cover such expenses."

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Tips for improving your retirement outlook

Americans across the board can improve their retirement outlook by "safeguarding their health, focusing on employment, managing their money and financial planning," the Transamerica survey said. Workers can implement a strategy to improve their retirement prospects with the following steps, recommended by Transamerica: 

1. Engage in financial planning to better understand your financial health 

"Create a budget, prioritize expenses, set short and long-term goals, learn about investing, and develop a financial plan to help improve your fiscal health," the study said. "If you delayed mortgage or rent payments, learn what your obligation is to make past due payments and what financial assistance may be available to you."

2. Participate in an employer-sponsored retirement plan or contribute to a tax-advantaged account

If you start early, saving even in small amounts could add up over decades of working life. Workers should look to "take full advantage of matching employer contributions" to 401(k) plans, Transamerica said.

If that's not an option, workers should consider contributing to a Traditional or Roth IRA. The IRS recently announced that it had increased contribution limits to 401(k) and other retirement accounts up to $22,500 starting in 2023. That applies to people who participate in 401(k), 403(b), most 457 plans, or the Thrift Savings Plan for federal employees.  

"Job seekers should take retirement benefits into consideration as part of an overall compensation package," the survey said.

3. Avoid taking loans and early withdrawals from retirement accounts

Workers should be aware that tapping retirement accounts early can "severely inhibit their long-term growth," the survey said. 

Yet, the survey said that "a concerning percentage of workers are dipping into their retirement savings before they retire." Thirty-seven percent of respondents said they had taken a loan, early withdrawal or hardship withdrawal from their IRA, 401(k) or similar plan and most (39%) said they did it to pay off debt. 

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