In Tough Economy, Americans Stay Focused on Saving for Retirement: Survey

 

What You Need to Know

  • About two-thirds of Americans haven’t changed their investment approach toward retirement, according to an Empower survey.

  • Research showed that participants engaged in their retirement planning have 56% higher savings rates than their unengaged peers.

  • However, the number of participants who took out loans increased by 13% over the past 12 months.

Some 63% of Americans are confident that they are financially on track for retirement, notwithstanding rising prices and inflation, according to research released recently by Empower, which administers assets for more than 17 million retirement plan participants.

“When the economy is experiencing a downturn, American workers need guidance and support to help deter them from making financial decisions that may negatively affect them down the road,” Edmund Murphy, Empower’s president and chief executive, said in a statement.

“Despite the challenges our country is facing, it’s encouraging to see that most savers haven’t changed their investment approach and are still focused on saving and planning for their future.”

Researchers analyzed 4.3 million active participants from primarily corporate DC plans with Empower as the recordkeeper, and conducted a survey in August among 2,505 working Americans between 18 and 70 years old.

Research Findings

The research showed that participants who are engaged in their retirement planning have 56% higher savings rates than unengaged ones. They are also likelier to take full advantage of their plan’s employer match.

Forty-eight percent of unengaged participants are not making full use of the employer match, compared with 22% of those who are engaged.

Participants who link multiple financial accounts in one place to create a consolidated view have savings rates approaching 11%, almost double the savings rate of unengaged participants. Forty-four percent of survey respondents said they felt more confident when they were able to see their financial account balances, debt and assets in one place.

The research found that changing demographics and the rise of Generation Z are reshaping the DC landscape. Gen Zers as a percentage of Empower active participants jumped from 4% in the first quarter of 2020 to 8.9% in this year’s third quarter.

Empower said this trend will accelerate as Gen Zers are expected to account for 30% of the 2030 workforce.

The research findings indicated that people who use an advisor are more likely than those who do not to feel more confident that they are saving enough in their 401(k) plan and in making investment decisions.

They also consider themselves to have a higher level of knowledge about investing and are more confident about their retirement readiness.

On a downbeat note, Empower’s study found that the number of participants who take out loans increased by 13% over the past 12 months, and hardship withdrawals jumped by 24%. More than a quarter of surveyed respondents say they are very or somewhat likely to take a loan or hardship withdrawal in the next six months.

“Through this year’s study, we found that nearly half of Americans have cut back on daily expenses, created a budget or cut back on entertainment, and one in five baby boomers and Gen Xers postponed retirement,” Luis Fleites, director of thought leadership for Empower, said in the statement.

“I think this illustrates that while we are shifting our focus on short-term spending and planning for now, most savers are still trying to remain long-term focused.”