The importance of saving for retirement is ingrained in most Americans when they join the workforce. Still, the ambiguous nature of 401(k)s, investing, and financial planning often deters people from maximizing their retirement plans.
Secure employer-sponsored pension plans are largely a relic of the past, forcing workplace savers to take responsibility for their own retirement savings and investment strategy — a change many feel ill-equipped to make.
With Social Security reserves expected to run dry by 2035, benefits may be reduced, so it is vital to maintain a long-term quality of life and mental health so that you can support yourself in a large part based on your retirement savings.
Related: The average American confronts new 401(k), retirement savings facts
Outliving your designated retirement savings, or longevity risk, is a primary concern across all age groups. A recent July 2024 Blackrock study found that 60% of all retirement savers — age, gender, and type of retirement saver — worry about not having enough money to support their lifestyle through retirement.
The study also found a confidence gap between men and women when navigating the complexities of retirement investment strategy.
Key retirement concerns across demographics
Each age group and gender has different outlooks on retirement and unique concerns about saving for the future.
Gen Z: Though 77% feel on track to retire with the lifestyle they want, 69% worry about outliving their retirement savings. Younger savers are hungry for guidance, as 63% admit they need to understand more about investments to manage their savings confidently.
Millennials: Fifty-six percent worry about outliving their retirement savings, mainly due to concerns over personal debt. Nearly two-thirds (62%) of millennials hold credit card debt, the most of any generation. Balancing day-to-day finances with planning for the future is a hurdle millennials must address to ensure future financial health.
More on personal finance:
- How your mortgage is key to early retirement
- Social Security benefits report confirms major changes are coming
- The average American faces one major 401(k) retirement dilemma
Gen X: Eighty percent are saving a consistent amount for retirement, the highest amongst all generations. However, only 60% actually feel on track for retirement, and 63% worry about outliving their retirement savings.
Even worse, the majority (74%) of Gen X believe they won't have the same level of certainty as previous generations.
Baby Boomers: Sixty-eight percent feel on track for retirement, but income is the biggest inhibitor preventing some from meeting their goals. Money management is a critical concern for baby boomers, as almost half need help calculating how much spending they will do in retirement and how much income they'll need to live comfortably.
Shutterstock
Gender: There is a considerable difference in sentiment towards retirement between men and women. Seventy-five percent of men feel on track to retire with the lifestyle they want, vs. just 59% of women who feel the same.
Women are also more likely to feel that they need clarification about translating savings into monthly income.
Recommendations to create a sound retirement strategy
Eighty percent of savers say that the looming worry of outliving their retirement savings is negatively impacting their mental health today, and a staggering 99% of savers say it would be financially helpful to receive guaranteed income in retirement. Both employers and employees can make changes today to maximize their savings and ensure a generous nest egg to live off of in the future.
Adding different investment options that provide potential for secure income is the top plan change that employer sponsors say could improve future outcomes for savers.
Related: The average American faces one major 401(k) retirement dilemma
Blackrock recommends that those planning for retirement consider utilizing Target Date Funds (TDF). TDFs combine different types of stocks, bonds, and other investments to create a diverse retirement portfolio that changes over time. It prioritizes investment risk when you're younger and transitions to a conservative approach as the plan holder approaches retirement.
Target Based Funds offer a practical solution to plan and maximize retirement investment options:
- Sixty-one percent of retirement savers utilizing an employer plan are already invested in a target date fund or plan to invest soon, as TDFs help reduce the effects of market volatility.
- TDFs are a win-win: Workplace savers prefer a target date fund for its simplicity — while company sponsors view it as a way to help alleviate spending challenges.
- Workplace savers who invest in a TDF cite convenience and access to professional management as the most common primary reasons for their choice.
- It helps those who are unsure how to approach retirement investments; workplace savers cite the fund's convenience and access to professional financial management as key benefits.
Retirement savers should also consider taking advantage of recent federal retirement contribution legislation and limits updates.
The SECURE 2.0 Act, passed in late 2022, encourages employees to contribute to their employer sponsored retirement plans, such as matched student loan payments. 72% of millennials indicated they would stay with their employer if this benefit were accessible.
The updated 2024 IRS limits also allow retirement savers over 50 to maximize the tail end of their saving window. Individuals can now save an additional $7,500 in their 401(k)s. However, only 31% of those eligible are currently making catch-up contributions. And since 85% of Baby Boomer retirees admit that secure income makes a more significant difference in retirement than anticipated, every additional dollar invested counts.
Related: Veteran fund manager picks favorite stocks for 2024
