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Coronavirus: Early Retirement Withdrawals and Savings by Generation

Coronavirus: Early Retirement Withdrawals and Savings by Generation

by | May 27, 2020 | Blog

Coronavirus: early retirement withdrawals and savings by generation. New research examines how the COVID-19 pandemic has impacted retirement planning.

Initially, the coronavirus pandemic highlighted how unprepared people were for a financial disaster, putting a spotlight on the lack of emergency savings and an overreliance on credit cards. New research shows COVID-19 has also had a significant impact on long-term financial planning. 

The majority of workers (52 percent) now expect to work past age 65 or don’t plan to retire at all, according to a new study by the Transamerica Center for Retirement Readiness. In light of the coronavirus pandemic, 23 percent of workers say their confidence in their ability to retire comfortably has declined. 

“The long-term implications of the coronavirus pandemic and recession on retirement security have yet to be fully realized,” said Catherine Collinson, CEO and president of Transamerica Institute® and TCRS. “However, the financial vulnerabilities among workers across all generations are becoming clear.”

Coronavirus: Early Retirement Withdrawals and Savings by Generation

Millennials Retirement Withdrawals, Savings and Financial Stress

  • 22 percent of Millennials have already taken out a loan and/or early withdrawal.
  • 20 percent plan to take out a loan and/or early withdrawal.
  • Millennials have an estimated median of $23,000 saved for retirement.
  • 26 percent of Millennials have student loan debt.
  • Millennials have saved an estimated median of $3,000 for emergencies.

Generation X Retirement Withdrawals, Savings and Financial Stress

  • 15 percent of Gen Xers have already taken or plan to take out a loan and/or early withdrawal.
  • Gen Xers have an estimated median of $64,000 saved for retirement.
  • 52 percent of Gen Xers have credit card debt.
  • Gen Xers have saved an estimated median of $5,000 for emergencies.

Baby Boomers Retirement Withdrawals, Savings and Financial Stress

  • 10 percent of Baby Boomers have already taken or plan to take out a loan and/or early withdrawal.
  • Baby Boomers have an estimated $144,000 saved for retirement.
  • 25 percent of Baby Boomers are debt-free.
  • Baby Boomers have saved an estimated $15,000 for emergencies.

“Although our research paints a sobering picture, it also surfaces some opportunities that can help mitigate the negative economic effects of the pandemic and improve retirement prospects,” Collinson said.

Providing financial wellness benefits, offering flexible work arrangements and on a larger scale, collaborative efforts with policymakers and industry leaders can increase awareness of relief programs like unemployment insurance and alert employees to potential alternatives to making early withdrawals from retirement accounts.

“Workers’ ability to achieve a secure retirement highly depends on a robust employment market, the availability of retirement, health, and welfare benefits, the preservation of safety nets such as Social Security and Medicare,” Collinson said. “Even amid the pandemic and current hardships, we are presented with an opportunity to come together to reimagine our world — including how we live, work, retire, and age with dignity.”

More on Topics Related to Retirement Planning, Financial Stress and Financial Wellness

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The Top 3 Financial Stressors Affecting Gen Z

The Top 3 Financial Stressors Affecting Gen Z

by | Aug 26, 2019 | Blog

The top 3 financial stressors affecting Gen Z. Gen Z is both the youngest and largest generation in the U.S., and they are beginning to enter the workforce with a whole host of unique financial stressors.

Generation Z — the generation immediately following Millennials — is the latest group entering the workforce, but work and money are already at the top of their list of stressors. According to the American Psychological Association, 81 percent of Gen Z adults are stressed about money, a staggering number compared to the 64 percent of all other adults who are similarly stressed.  

Gen Zers are eager to reach their financial goals and have clear plans for the future, but a lack of financial literacy, the overwhelming burden of student loan debt and overspending are all holding this young generation back. Take a deeper look at the top financial stressors affecting Gen Z below.

Gen Z Needs Financial Literacy 

In a study by EVERFI, only 33 percent of Gen Zers felt prepared to manage their money. The same study shows that this generation has a lack of knowledge regarding their personal finances: 9 in 10 have had experiences with a checking account, but less than 60 percent checked their bank account in the past year and only 40 percent have ever created or used a budget.

Unsurprisingly, these lackluster money management skills stem from an absence of financial literacy education for the youngest generation entering college and subsequently, the workforce. 

Student Loan Debt Stress

The total student loan debt in the U.S. has reached nearly $1.6 trillion, making debt a pressing concern for all Americans, but particularly for those who are in college or recently graduated: Gen Z. Of the class of 2018, 7 in 10  took out student loans to cover their education, with an average debt of $29,800, according to research by Student Loan Hero. 

With the cost of college continuing to rise, the student debt crisis is only worsening and a report by Brookings predicts more borrowers will default on their loans. As a result, over 40 percent of Gen Zers now identify student loan debt as a significant source of stress in a survey by Lifeworks. 

Gen Z Overspending 

Research by  EVERFI found that 10 percent of Gen Zers buy things they can’t afford, and four in 10 don’t stop spending when resources are low.

Staggeringly high debt and a lack of financial education both contribute to this last Gen Z financial stressor — overspending paired with undersaving. One-third of Gen Zers reported feeling stressed about poor spending habits. The spending, paired with increasing debt, directly links to a lack of savings: almost 20 percent are not putting anything towards their savings each month.  

This financial stress affects workers’ productivity and increases healthcare costs, hurting both employees and employers. Financial wellness programs like Best Money Moves can help. Best Money Moves is mobile, gamified and easy-to-use, with an emphasis on financial literacy and accessible tools that’s perfect for Gen Z. It provides practical, unbiased help so employees can make smarter financial decisions and manage the debt they have. 

More on Financial Stress and Financial Wellness Programs

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5 Fast Financial Stress Statistics

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What Is Financial Literacy and Why Is It Important?

4 Big Employee Benefit Trends for Family Planning

How Can Financial Wellness Be Improved?

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If you want to learn more about how Best Money Moves can bring financial wellness to your company download our whitepapers and sign up for a demonstration here.

3 Financial Stressors Affecting Every Generation

3 Financial Stressors Affecting Every Generation

by | Aug 26, 2019 | Blog

3 financial stressors affecting every generation. Millennials, Baby Boomers and Gen Xers all have something in common — they’re stressed about their emergency savings, retirement and housing.

Every generation, from Millennials to Baby Boomers to Gen X, has varying financial pain points. However, they all have a few stressors in common — concerns over emergency savings, retirement costs and housing. When asked what financial wellness meant to them in a survey by PwC, the top answer across all generations was not being stressed about their finances. 

Emergency Savings

For Millennial and Gen X employees, not having enough emergency savings for unexpected expenses topped their list of financial concerns. For Baby Boomers, emergency savings came in just behind not being able to retire when they want to as far as their most pressing financial challenge. All generations have reason to be concerned, as a recent survey by Bankrate found three in 10 U.S. adults have no emergency savings and couldn’t cover three months’ worth of living expenses. 

Additionally, only 18 percent of Americans say they could live off of their savings for at least six months. Experts think part of the reason for the widespread lack of savings is that incomes haven’t kept pace with rising household expenses.

Retirement Contributions

A recent study by AARP found that at least two in five survey respondents from each generation were not confident that they will have enough money to live comfortably throughout retirement. Nearly half of people across the three generations said they hadn’t put away any money for retirement at all. This is particularly troubling, because the longer people wait to save for retirement, the longer they’ll have to work to sustain their preferred lifestyles. More than 80 percent of today’s employees expect they’ll need to work in retirement to sustain themselves financially, according to research by PwC. 

More than 75 percent of AARP’s respondents also agreed that Social Security and Medicare are important to their personal retirement. An overwhelming majority of Baby Boomers (95 percent) said it’s very or somewhat important that Social Security is there for them in retirement. With the future of these programs uncertain, it’s worrisome that so many Americans are aiming to rely on these them in retirement. 

Housing Costs

Although buying a house is a quintessential part of the American Dream, there are many barriers in place that prevent people from making the purchase. For Millennials and Gen Zers, the biggest obstacle to buying a house is the high cost of the down payment on a home, according to research by Freedom Debt Relief. That’s the second-biggest concern for Baby Boomers, who are most stressed about the cost of the monthly payment on a house. 

Many people are also unable to afford a home because of debt that they already have. Credit card debt makes up a majority of debt that people across generations have, with 46 percent of Americans reporting they have credit card debt. This makes it one of the bigger burdens for people trying to save up more to buy a house. 

All this financial stress is damaging the quality of the workplace, as employees are spending an average of 3-5 hours per week at work worrying about their personal finances. Financial wellness programs like Best Money Moves can help. Best Money Moves is mobile, gamified and easy-to-use. It provides practical, unbiased help so employees can make smarter financial decisions and manage the debt they have.

More on Financial Stress and Financial Wellness Programs

5 Must-Have Benefits for Millennial Employees

How Does Financial Wellness Affect Health?

5 Fast Financial Stress Statistics

Hiring Trends to Watch in 2020

What Is Financial Literacy and Why Is It Important?

4 Big Employee Benefit Trends for Family Planning

How Can Financial Wellness Be Improved?

Top 10 Employee Benefits for 2020

If you want to learn more about how Best Money Moves can bring financial wellness to your company download our whitepapers and sign up for a demonstration here.