A majority of retired Americans are living on less than half of their preretirement annual income, even when Social Security is included, according to a survey by Goldman Sachs Asset Management.
The survey also found that 29% of retired respondents are getting by on 40% or less of their preretirement income.
“The current environment is driving considerable uncertainty for retirees, and those living on less than half of their pre-retirement income are particularly vulnerable,” said Greg Calnon, GSAM’s head of multi-asset solutions.
Goldman Sachs Asset Management's recently released Retirement Survey & Insights Report for 2022, conducted in July and August, took data from more than 1,500 U.S. adults of various ages.
The causes of financial stress were many and varied, but topping the list were high inflation (cited by 71% of respondents), future healthcare needs (51%) and potential reductions in Social Security (46%).
Calnon noted that low yields on fixed-income portfolios and declining equity markets were contributing to the anxiety as well. Retirees, he said, are deeply concerned about “how much they can spend and how long their savings will last.”
Working People Also Fall Short
It’s not just retirees who are concerned, either. The survey also found the following:
- 53% of working baby boomers and 51% of working Gen X respondents (both generations consist of people born between 1965 and 1980) reported they are “behind in their retirement savings”;
- 40% of working Gen X respondents and 30% of working baby boomers are concerned about meeting their savings goals.
Mike Moran, senior pension strategist at GSAM, said a “financial vortex” is impacting current retirement savers. They’re pulled one way by wanting to save in order to start a family or buy a home, yet at the same time they’re beaten down by market volatility and high inflation, he said.
Most respondents, he said, have a pervasive fear that it’s not a question of if but when their plans will be upended by events beyond their control, such as a bear market. “Knowing how to adapt [to unplanned events] to keep retirement savings on course is key to navigating these challenges,” said Moran.
But how can clients navigate through these challenges?
The study suggests that identifying how individual pressures impact different sorts of clients is a valuable first step.
For instance, too many monthly bills was listed as a main problem by 84% of millennials (those born between 1981 and 1996) but only 56% of baby boomers felt that way—with other generations falling between those figures. Financial hardships such as home repairs were a top concern for more than 75% of millennials and those born between 1997 and 2012, known as Gen Z, but the same was true for only 51% of baby boomers.