Many Americans are continuing to increase their retirement savings, but most will also face financial and personal challenges to their ability to achieve future financial goals, according to a recent report from Goldman Sachs Asset Management.

More Americans this year than last year believe that their retirement savings are on track in 2023, according to Goldman’s “Retirement Survey & Insights Report 2023,” which included responses from 5,200 people. Nearly two out of three respondents to the survey, or 65%, felt their savings were on track, up from 57% last year.

However, a series of financial challenges, which the researchers have deemed a “financial vortex,” could reduce retirement savings by up to 37%. These challenges include credit card debt, college savings requirements, student debt and the need to give care to disabled or elderly family members, issues that affect large portions of working Americans regardless of economic and financial market conditions.

“The financial vortex is not a new phenomenon, but it has crept into our lives over the last 10 years,” said Chris Ceder, a senior retirement strategist at Goldman Sachs Asset Management, speaking last week in a webcast about the survey results. “It is one of the elements we think is going to be an important factor in how people have to save for retirement, and it is largely unmet by the way the retirement system is today. … While we do believe the system has not met these needs thus far, we do believe there is a path forward and solutions that can make a meaningful difference in how people navigate their own journey to retirement.”

Because of the financial vortex, someone who “does everything right”—consistently saving what appears to be a sufficient amount over the duration of their working years from ages 25 to 65—could easily “get to 30%-40% lower lifetime savings” because they are hindered by one or more financial vortex issues, Ceder said.

Perhaps that’s why the retired respondents in Goldman’s survey showed mixed feelings about retirement income. According to the survey, 42% of retirees report receiving 50% or less of their preretirement income, including Social Security. Only 53% of the retired respondents felt satisfied with their retirement income.

Signs of the Financial Vortex
The survey found that 44% of retirement plan participants have cashed out of their savings at least once because of a job change, up from 42% in 2022. More participants, 42%, have stopped saving for retirement because of financial hardship, up from 33% in 2022. More participants also report having left the workforce at some point to care for somebody else: 39% said they had, up from 22% in 2022. And 22% said they have left full-time work for part-time work because of their caregiving responsibilities, a figure that rose from 10% last year.

One in five survey respondents who were in their preretirement years, 21%, felt as if one or more financial vortex issues would delay their retirement by four or more years. But these respondents might have an overly optimistic view about their ability to “escape” the so-called vortex: 50% of retirees in the survey report leaving the workforce earlier than they had intended. Within that early retirement group, 47% left the workforce for reasons outside their control, like caregiving requirements or their own poor health, and 54% had to leave work more than four years earlier than they had expected.

Exacerbating the uncertainty was the fact that only 36% of the survey’s respondents had three months of income or more set aside for emergencies. The report’s authors cite emergency savings as key to softening the impact of financial vortex issues.

Literacy and Planning
Financial literacy is both a help and a problem. Forty-seven percent of the survey’s respondents said they were managing their own retirement savings, yet only 13% were able to answer five standardized financial literacy questions, sometimes known as “the big five,” about interest, inflation, compounding and diversification. Respondents among the 13% who were able to answer all of the questions correctly were less likely to say that their retirement savings had been hurt by the financial vortex.

Goldman Sachs also found that the least literate respondents (the 55% of respondents that answered all of the big five questions wrong) were also more likely to manage their own savings, while those who answered all five correctly were less likely to self-manage and most likely to seek professional advice.

A financial plan was also an important factor in softening the blow. The survey found a large divergence between respondents who felt as if their savings were on track and had a financial plan, 79%, and those who felt on track without a plan, 34%. A plan also conferred retirement confidence: 83% of those who had one felt they could reach their financial goals while only 40% of those without one felt that way.

Three-fifths of respondents, 60%, reported having a financial plan.

Back to Income
Retirees in the survey made clear that strategies blending investment income with “guaranteed” income from insurance and annuity products provided both satisfaction and peace of mind. More than half of the retired respondents who preferred blended strategies, 59%, reported feeling satisfied with their retirement lifestyle, while only 49% of those who preferred investment-only income strategies felt satisfied. The figure was also only 49% for those who preferred annuity-only strategies.

Working respondents echoed this trend. When asked about what plan features were most important to them when deciding whether to keep assets within an employee-sponsored retirement plan, the survey found that guaranteed income options topped the list for both working respondents (43% of whom cited these options) and retired respondents (38% of whom named them). Retirement tools and calculators came in second among the preferred features.

Goldman Sachs also found that retirees and working respondents wanted employee benefits and retirement plans reconfigured to address financial vortex issues like building emergency savings and accessing professional advice and financial planning.

The retirement survey was conducted among 5,261 U.S. individuals in July 2023, including 3,673 working people and 1,588 retirees.