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Retirement Planning > Saving for Retirement

U.S. Heading From Retirement ‘Crisis’ to Retirement ‘Catastrophe’: Allianz

By John Manganaro

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What You Need to Know

  • A majority of Americans now consider accounting for financial crises as a permanent part of retirement planning, a new survey shows.
  • Nearly 40% say their retirement strategy has been derailed by recent economic events.
  • Baby boomers believe they are better prepared for retirement than their elders, but Gen Xers and millennials are more pessimistic.

Unless a major course correction is achieved, workers in the United States appear to be on track for significant retirement hardship, and a growing body of academic and survey research suggests Americans are facing a grim new reality after they retire.

The latest analysis pointing to this conclusion was published Wednesday by Allianz Life.

According to the firm’s new poll of some 1,000 middle-class American households with incomes above $75,000 ($50,000 for singles) or investable assets of $150,000 or more, market volatility and recurring financial crises are making planning for retirement extremely challenging.

In a summary of the survey results, L. Kelly LaVigne, vice president of consumer insights for Allianz Life, suggests the nation may be facing more of a retirement “catastrophe” than a retirement “challenge” or “crisis.”

“Understandably, Gen Xers and millennials are feeling uncertain about the future. And looking back over the past 10-plus years, who can blame them?” LaVigne says. “From financial crises to politics to the pandemic, we all have reason to wonder what else might be just around the corner.”

The good news, LaVigne says, is that Americans can take action today to better prepare themselves for retirement. Even in uncertain times, she says, proper planning will go a long way toward securing retirement goals.

“That’s why it’s so important to have a written financial plan that includes not only sound strategies to accumulate the money you’ll need in retirement, but that also includes risk mitigation strategies to protect you from the inevitable rough patches,” he says. “The key takeaway here is that the new retirement reality requires everyone, now more than ever, to have a plan and stick to it.”

Crisis Mode

The new data suggest the dynamics of retirement planning have dramatically shifted as Americans navigate inflation, market volatility, financial crises, fear of bank failures and other challenges.

With so many financial risks, many Americans may be trading a more secure financial future just to get by in the here and now, Allianz Life says.

For example, recent financial crises caused 46% of respondents to say that they have reduced or stopped saving for retirement without plans to increase their savings levels in the foreseeable future to account for the disruption.

At the same time, 49% say that everyday costs are increasing so much that they won’t be able to afford basic expenses in the future, and this is seen as one of the greatest risks to retirement success. This percentage is up from 44% in 2022 and 38% in 2021, according to Allianz Life.

Troublingly, nearly 40% of Americans admit their retirement strategy has been derailed, and they aren’t sure when or how they’ll get it back on track. A solid majority of 56% consider “financial crises” as a permanent part of their retirement planning.

Other stats show a “remarkable” 61% of Americans say they are more afraid of running out of money than they are of death, but many are still not taking the steps necessary to set themselves up for a successful financial future and retirement.

Specifically, 40% say they don’t have a financial plan for retirement and “will just figure it out when they get there,” while 56% don’t know where to start planning beyond having a basic retirement account like a 401(k) or IRA.

Big Generational Differences

As LaVigne highlights, many baby boomers believe they are better off with respect to retirement readiness than previous generations, but Gen Xers and millennials are more pessimistic about their financial futures.

Many Gen Xers and millennials feel like shifts in health insurance and employer-sponsored retirement plans have made financial wellness more difficult, the data shows.

Planning for the new retirement reality appears to be particularly challenging for members of Generation X, defined here as those born between 1964 and 1978.

Unlike millennials, who still have ample time to save before retirement, and boomers, many of whom are already retired, Generation X is realizing that retirement is getting closer and that they may not be ready — nor do they have a clear picture of how to get there.

According to Allianz Life, Gen Xers’ confidence in their ability to financially support all the things they want to do going forward is the lowest among generations and is also starting to trend downward.

Of note for the advisor community, the evidence suggests this lack of confidence could be driven by a lack of financial knowledge.

Allianz Life says Gen Xers are the least likely to have an understanding of the mechanics of saving for retirement — namely how long they expect to live in retirement, how many years their money will last in retirement, how much total money they will need to save for retirement and what their health care costs will be.

(Image: Shutterstock)

John Manganaro

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