A new report from Goldman Sachs (GS) provides an overview of the state of retirement planning, highlights a surprising way some people are getting in their own way, and offers at least one uncommon solution.
The company’s fifth annual Retirement Survey & Insights Report sounds a familiar alarm (many people aren’t saving enough for later life) but suggests that the familiar solution (save more) fails to account for the “complex and evolving realities faced by millions of Americans.” Its survey of 5,000 U.S. adults (70% working, 30% retired) highlighted the “drag” that competing financial priorities are having on people’s ability to save for retirement, but also the potential “lift” that various solutions could have.
The issues
The Goldman Sachs report notes that in many spending categories, inflation has driven costs up faster than wages have grown. When asked which issues have made it difficult to save for retirement, the table below shows the percentage of respondents that checked each one.
67% | Too many monthly financial expenses |
64% | Financial hardships (home repairs) |
62% | Caring for and financially supporting family members |
58% | Credit card debt |
57% | Paying down existing loans (student loans) |
55% | Time out of the workforce (child, elder care) |
49% | Saving for college |
The report calls all of the above “competing priorities,” meaning it can be difficult to cover these costs and save for retirement.
While some of these expenses are largely out of a person’s control (job loss, the need to care for an elderly relative), others are controllable. Naming home repairs as a financial hardship, for example, may indicate that some homebuyers are failing to account for the cost of maintenance and repairs when they decide how much house to buy.
The report also noted that people are spending more years in retirement than in the past.
The attitudes
One finding in the Goldman Sachs report parallels an issue that comes up year after year in the Employee Benefit Research Institute’s long-running Retirement Confidence Survey: The disconnect between people’s optimism about how well prepared they think they are and their actual preparedness.
The GS report authors noted that despite “generally positive sentiment among current retirement savers…the reality of retirement saving is not as strong as the sentiment.”
Many respondents even hold conflicting attitudes about their own retirement preparedness. “While savers report they are on track for retirement, a large portion also believe that they will run out of money during their lifetime.” More specifically, 68% of respondents say they are ahead or on track with their retirement savings, and the same number say they are confident they will be able to meet goals, while at the same time 58% believe they will outlive their savings.
Also of note, the GS report found that many retirement savers may be setting their savings targets too low to sustain current lifestyles. When asked how much total annual income they anticipate needing at the start of retirement (including Social Security), just 18-28% (depending on age) of people still in the workforce said they would need more than 70% of their pre-retirement income. When retirees were asked whether they are satisfied with their income, the highest satisfaction levels were found among those with 81-90% of their pre-retirement income, or more than 90%, groups that include just 9% and 10% of retirees respectively.
Life happens
The GS report noted that "major life events…can materially affect retirement saving." The two most-cited such events among survey respondents are experiencing a major financial hardship and buying a home. That points to the importance of building and maintaining a healthy emergency fund and, as noted earlier, not stretching so far in buying a home that you aren’t able to set aside money each month for maintenance and repairs.
In 2024, a national survey of more than 900 recent homebuyers found that 82% had regrets. One of their top regrets was spending too much on the house, with many indicating that the cost of maintenance and repairs caught them off guard.
While major life events can get in the way of saving for retirement, the single biggest negative impact on retirement savings, according to the GS report, is getting off to a late start (i.e, age 35 or older) in setting money aside for later life.
“Lifestyle creep” is real
One of the most interesting findings in the GS report has to do with how many people report living paycheck to paycheck. Not surprisingly, relatively high numbers of respondents in the lowest income group (<$50,000) say they are living paycheck to paycheck, with the figures steadily declining in each of the next three income segments.
However, and this is where it gets interesting, the percentages then jump in the two highest income groups. In fact, a higher percentage of people in the $300,000 to $500,000 and $500,000+ income categories say they are living paycheck to paycheck than people making $50,000 to $300,000, “potentially illustrating the impact of lifestyle creep, the phenomenon of luxuries becoming necessities to certain income cohorts,” according to the report’s authors.
Doing better
The report noted a number of steps retirement savers can take to better prepare. Among them, utilizing a personalized retirement plan, adding a small allocation to private equity investments, and buying an annuity with some of their retirement portfolio.
However, the biggest single positive impact on retirement savings is something you don’t hear commonly talked about in this type of report: "Financial grit.” According to Goldman Sachs, that encompasses a long-term orientation, optimism, resilience, and perseverance through hardships.
Controlling for income, the GS report found that respondents determined to have high financial grit hold, on average, 49% more in retirement savings than those with low financial grit, “highlighting the material impact that mindset and behavior may contribute to accumulation trajectories,” according to the report’s authors.
So, as you prepare for retirement, along with being intentional in how much you’re investing, be sure to also proactively cultivate beneficial investment-related perspectives, such as taking the long view and persevering through the market’s ups and downs. The more financial grit you develop, the better.
