According to a new report, Millennials are more than twice as likely as Gen Xers or Boomers to have dipped or plan to dip into their retirement savings because of the pandemic. But no generation reports feeling very financially secure: Almost 1 in 4 workers say that their confidence in their ability to retire comfortably has declined due to the pandemic. (Transamerica Center for Retirement Studies)
NH: Is anyone in good shape for retirement? You might find yourself asking that question after reading this report, which paints a gloomy picture. Millennials, Xers, and Boomers have their own unique challenges related to retirement.
But they all boil down to the same issue: Too many Americans don’t have enough savings to weather an emergency, let alone to ensure a secure and comfortable retirement.
The report includes surveys of workers before and during the COVID-19 pandemic. Prior to the pandemic, the most common financial priority named by Boomers was saving for retirement (69%), but Xers and Millennials named paying off debt (66%). Millennials were also more likely than the older generations to say that they were prioritizing “just getting by to cover basic living expenses” (39%).
In April, the shares of every generation prioritizing saving for retirement declined, while the shares focused on building up emergency savings--and the share of Boomers focused on just getting by--ticked up. The results from the latest EBRI Retirement Confidence Survey, taken in late March, also showed workers losing confidence in the potential of their retirement funds to last over the long term.
The pandemic has put into stark relief the fact that many Americans don’t have much to get through hard times in the short term. Workers have saved $5,000 (median) in emergency savings; nearly a third (29%) have even less.
To be sure, an amount this low doesn’t necessarily mean that people aren’t able to respond to an emergency. Some may have equated the term “emergency savings” with cash, which even the most well-off just might not have sitting around in bank accounts, particularly when interest rates are so low. Given the rest of the survey results, however, it’s unlikely this describes most of the respondents.
How do we know?
Well, Americans’ median retirement savings don’t look much better. Millennials have saved $23,000, Xers $64,000, and Boomers $144,000. Boomers are about evenly split between those with high and low balances: 40% have saved more than $250K, while 42% have saved less than $100K. Xers are far less likely to be found at the top. Just 25% have saved more than $250K, while 47% have less than $100K.
Even before the pandemic, almost 1 in 3 workers said that they had taken some form of loan or withdrawal from their retirement savings. Fully 36% of Millennials had done so, compared to 33% of Xers and 23% of Boomers. But Millennials are considerably more likely than older generations to be considering tapping their retirement savings or to have already done so due to the pandemic (33%, which drops to 15% for Xers and 10% for Boomers).
The CARES Act has made it possible for people to withdraw from their retirement funds without penalty and delays the tax payments. This measure is bailing young people out now, but it’s coming at the expense of their future.
What exactly counts as retirement savings? For most people, this refers to their defined contribution plans: 401(k)s, IRAs, SEPs, Keoughs, etc. Almost everyone knows roughly what they've got in these.
Most people don't know how much is saved in their defined benefit plans--but that doesn't matter much because very few Xers or Millennials any longer participate in these plans. In 2018, according to the BLS, only 17% of all private-sector workers were even partially covered by the DB pension. And 32% were covered by no plan at all, DB or DC. Sure, most of these will still get Social Security. But the median Social Security retired worker benefit is no more than about $1,300 per month.
All this isn’t to say that retirement has become some sort of impossible dream. Most Americans (74%) are still looking forward to it, and 60% think they’re building a large enough nest egg to make it happen. But almost as many (52%) also expect to work past 65 or don’t plan to retire at all...with the #1 reason being the income.
Retirement still sounds great to most Americans. They just don’t know when they’re going to be able to afford it.
* * *
ABOUT NEIL HOWE
Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.
A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.
Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."
Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.
Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.
Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.