Retirement Confidence Has Declined Across Generations

Inflation is proving a punch to the gut for workers’ retirement confidence, new BlackRock survey data show. 

The survey, “The 2022 BlackRock Read on Retirement,” found that across generations—Generation Z, Millennials, Generation X and Baby Boomers—more workers feel unprepared or unsure if they are on track for retirement (37%) than in the previous three years. Feeling unprepared for retirement is highest for women, with 47% reporting they lack confidence, according to the survey.

Among women, 53% reported that they feel on track with their retirement savings, compared with 63% of all workplace savers and 73% of men, BlackRock data show. Among Black workers, 65% said they are on track for retirement, while 57% of Latino respondents and 51% of Asian/Pacific Islander respondents said the same.  

Inflation is one of the driving forces behind the decline in retirement confidence, with 87% of workplace savers reporting that they are concerned about the effect of rising prices on their retirement. The survey also found that 64% of respondents are worried about longevity risk—that of exhausting their total accumulated retirement savings in retirement—with higher levels among Black (75%), Asian/Pacific Islander (71%) and Latino (67%) workers.

“As we experience new market headwinds that could impact the retirement security of millions of Americans, it’s a critical time for our industry to ensure people are planning for retirement with confidence and clarity,” Anne Ackerley, head of retirement at BlackRock, said in a statement.

Retirement confidence has declined from its peak level of 68% in 2021, the survey shows.

In another retirement recordkeeper survey, the Charles Schwab 2022 401(k) Participant Study,  45% of workers called inflation an obstacle to saving, ahead of budgeting for monthly expenses (35%), stock market volatility (33%) and unexpected expenses (33%). The COVID-19 pandemic has particularly hurt women’s retirement confidence, according to a Nationwide Retirement Institute survey published earlier this year.

Retirement confidence varies across generations, BlackRock data show; 19% of Millennials and 22% of Gen X said they are not on track for retirement, compared with Baby Boomers at 12%. Plan sponsors are also concerned about participants’ retirement readiness, and reported that, on average, only 58% of their employees are on track for retirement, down from 63% in 2021.

Gen Z, which includes people born between 1997 and 2012, was included in the survey for the first time this year and reported the highest level of retirement confidence, at 69%. 

However, BlackRock also found that one-third of Gen Z workers could use a correction from plan sponsors regarding their total retirement savings target. Gen Z workplace savers reported saving 14% of their income, on average, which comes in above the rates of older generations—Millennials, Gen X and Boomers all had an average reported saving rate of 12%. But many of the young cohort believe they can retire comfortably with less than $250,000 in accumulated retirement savings, compared with half of Baby Boomers, who reported that they would need $1 million to $3 million in savings retire, the survey found.

One major retirement expense is health care: Fidelity Investments estimates that a 65-year-old couple retiring this year can expect to spend an average of $315,000 on health care costs throughout retirement.

While “Gen Z workplace savers are heeding the retirement industry’s decades-long push to save more,” the finding that these workers believe they can retire comfortably with $250,000 or less in savings signals to plan sponsors “that this group may need more education on planning for decumulation in retirement,” according to the BlackRock survey.

Workers without access to an employer-sponsored retirement plan are at the most peril of being unprepared for retirement, as 46% reported holding at least some of their savings in cash. Among this cohort, only 41% reported having familiarity with target-date funds, but when provided with a description of the vehicles, 66% reported high interest.  

“While it’s encouraging to see double-digit savings rates across every generation, we have work to do to help more Americans reach retirement with dignity and on their own terms—particularly those without access to employer savings plans, and women and people of color,” Ackerley said in the statement.  

The BlackRock research survey data was gathered from more than 300 large defined contribution plan sponsors, 1,300 workplace retirement plan savers, 1,300 independent savers and 300 retirees. The survey was conducted by Escalent, an independent research company. All respondents were interviewed using an online survey conducted this year from March 25 to April 30.