house. pension. College fund for kids. Emergency situations. All financial factors the average family must consider – but which comes first?
This is what Goldman Sachs refers to as the “financial maelstrom,” a melting pot of money priorities that most people find difficult to navigate.
A new report finds that the financial maelstrom is not only putting pressure on the balance, but also affecting workers’ ability to retire on time.
Goldman Sachs Retirement Survey & Insights Report 2023A report released this week found that most U.S. workers expect to delay retirement as they struggle to balance expenses such as debt repayments and home repairs with retirement savings.
More than 60% of employees said they expect to delay retirement by at least a year, with 21% expecting to delay retirement by at least four years. Another 29% said they would like to delay the end of their working life by one to three years.
The report also found that the factor most likely to affect people’s ability to save for retirement is the amount of monthly financial expenses.
Day-to-day expenses for most households surged in past year: Inflation peaked in 2019 It was 9.1% in June last year After the Federal Reserve intervened vigorously, it fell to 3.7% in August.
As experts warn that savings accumulated during the pandemic will eventually be depleted, the reserves consumers used to help pay for groceries, household bills, mortgages and more appear to be gone.
Among the more than 5,000 respondents Goldman Sachs interviewed, levels of fear for each factor also varied by age.
For example, 78% of Millennials surveyed said financial hardship would affect their ability to retire, while only 48% of Baby Boomers expressed this concern.
In fact, overall, Baby Boomers (presumably those with the most savings) are least worried about external factors affecting their retirement savings, followed by Gen X, then Gen Z, and then Millennials.
“Planning is not enough”
Most people who want to stop working hope that a decades-long financial strategy will protect them from short-term financial fluctuations.
Mike Moran, a pension strategist in Goldman Sachs’ asset and wealth management business, warned that wasn’t the case, saying that while plans would help, there was no magic bullet to the maelstrom.
“The financial vortex is invincible,” Moran told the Financial Times. comminicate podcast. “It is not affected by improvements in economic and financial market activity.”
The report also found that Americans have low levels of financial literacy, with only 13% of respondents in the Goldman Sachs report answering personal finance questions correctly.
So it’s concerning that nearly half (47%) of Americans manage their own retirement assets.
“Given the low level of financial literacy, this feels like it needs to change,” Moran said.
Yet he warns that even those with advisors can’t escape this spiral: “If you have a retirement plan, you’re more likely to feel confident in your ability to achieve your retirement goals, and your stress levels will be much lower.
“There are obvious benefits to having a plan. But even those who have a plan are not immune to financial maelstroms. Having a plan is not enough.”
How much emergency savings do you actually need?
this general rule of thumb Individuals should keep at least three months’ worth of living expenses on hand for emergencies.
Unfortunately for many, the Goldman Sachs survey found that this buffer could significantly impact an individual’s ability to continue putting cash away for retirement.
Of those surveyed, 58% said they had not experienced financial hardship that would have prevented them from contributing to a 401(k).
However, among this majority of workers, 94% have not managed to take advantage of the retirement savings provided by emergency funds: 76% have at least a month’s worth of emergency savings, while 24% have less than a month’s worth of emergency savings.
So it’s perhaps no surprise that employees’ top request from their employer is to add an emergency fund account as part of their wider superannuation pool.
“Many employees look to their employers, especially employer-sponsored retirement plans, to help them cope with other financial challenges they face,” Moran said. “When we think about plan design features, the first feature employers want to add to their sponsored retirement plans is an emergency savings account.
“That way, it can help them manage other unexpected financial obligations.”
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