Americans Facing a New Retirement Reality

The dynamics of retirement planning have dramatically shifted as Americans navigate inflation, market volatility, financial crises, fears of bank failures and other challenges. Taken together, these factors have created a new retirement reality that may have fundamentally shifted the long-term outlook for many Americans, according to the latest study from Allianz Life Insurance Company of North America (Allianz Life).

With so many financial risks, many Americans may be trading their financial future to get by in the here and now. For example, recent financial crises caused 46% to say they have reduced or stopped saving for retirement and don’t expect to increase their savings levels in the foreseeable future. At the same time, 49% say that everyday costs increasing so much that they won’t be able to afford basic expenses is one of the greatest risks to their retirement income, up from 44% in 2022 and 38% in 2021. Troublingly, nearly 40% of Americans admit their retirement strategy is derailed and they aren’t sure when or how they’ll get it back on track, and 56% consider “financial crises” as a permanent part of their retirement planning.

And while a remarkable 61% of Americans say they are more afraid of running out of money than they are of death, many are not taking the steps necessary to set themselves up for a successful financial future and retirement.

• 40% say they don’t have a financial plan for retirement and will just figure it out when they get there
• 56% don’t know where to start planning beyond having a basic retirement account like a 401(k) or IRA
• Only 42% have a written financial plan

“People’s retirements are too important to leave to chance,” says Kelly LaVigne, Vice President of Consumer Insights, Allianz Life. “The key takeaway here is that the new retirement reality requires everyone, now more than ever, to have a plan and stick to it. The good news is, even in these uncertain times, proper planning will go a long way toward securing your retirement goals.”

Whose Retirement Reality?

The varying views on retirement from boomers, Gen Xers and millennials illustrates how this new reality is going into effect. Many Boomers believe they are better off than previous generations, while Gen Xers and Millennials are more pessimistic about their financial futures.

• 70% of boomers believe they have a better financial situation overall compared to their parents at their age, compared to 55% of Gen Xers and 61% Millennials
• 66% of boomers feel more financial prepared for retirement compared to their parents, compared to 54% of Gen Xers and 60% of millennials.
• 63% of millennials and 47% of Gen Xers say it is taking them much longer to reach certain milestones like owning a house compared to their parents.

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

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

• 56% of millennials and 49% of Gen Xers say they feel less freedom than their parents did to change jobs, and make their financial situation better, because they can’t afford to lose their employer’s health insurance, compared to 34% of boomers.
• 57% of millennials feel like they get less support from their employer for retirement savings than their parents did, compared to 47% of Gen Xers and 43% boomers.

Boomers recognize the financial challenges of the younger generations, with seven in ten believing the overall financial climate these days makes it much harder for younger adults to balance savings and spending compared to when they were young.

Generation X Feeling the Squeeze

Planning for the new retirement reality is particularly challenging to Generation X -- those born between 1964 and 1978. Unlike Millennials, who still have ample time to save before retirement, and Boomers, many of whom are already in retirement, Generation X is realizing that retirement is getting closer and they may not be ready, nor do they have a clear picture of how to get there.

Gen Xers’ confidence in their ability to financially support all the things they want to do going forward is the lowest among generations (69% Gen X vs 76% Millennials and 86% Boomers), and is also starting to trend downward (69% 2023 vs 73% 2022 vs 75% 2021).

This lack of confidence could be driven by lack of financial knowledge. Gen Xers are the least likely to have an understanding of the mechanics of saving for retirement. They have no idea/cannot approximate:

• How long they expect to live in retirement (47% vs 43% of Millennials),
• How many years their money will last in retirement (59% vs. 49% of Millennials/Boomers),
• How much total money they will need to save for retirement (54% vs. 47% of Millennials and 40% of Boomers), and
• What their healthcare costs will be in retirement or how they are going to pay for it (62% vs. 44% of non-retired Boomers).

Along with this lack of confidence is a dawning realization among Gen Xers that time may be running out on their retirement planning:

• 25% say they have plenty of time to save money for retirement later, down from 43% in 2021
• 25% say retirement is too far away for me to start worrying about it now, down from 37% in 2021
• 47% say they can’t even think about saving for retirement right now and are just trying to take care of day-to-day expenses, up from 38% in 2022
• 64% worry they won’t have enough saved for retirement, up 55% in 2021
• 55% wish they would have saved more for retirement, up from 47% in 2022
• 67% say their income is not keeping up with the rising cost of living, up from 54% in 2022

Allianz Life conducted the online survey in February and March 2023 with a nationally representative sample of 1,000 individuals age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k.

About Allianz Life Insurance Company of North America

Allianz Life Insurance Company of North America, one of the Ethisphere World’s Most Ethical Companies®, has been keeping its promises since 1896 by helping Americans achieve their retirement income and protection goals with a variety of annuity and life insurance products. In 2022, Allianz Life provided additional value to its policyholders via distributions of more than $7.7 billion. As a leading provider of fixed index annuities, registered index-linked annuities and fixed index universal life insurance, Allianz Life is part of Allianz SE, a global leader in the financial services industry with approximately 150,000 employees in more than 70 countries. Allianz Life is a proud sponsor of Allianz Field® in St. Paul, Minnesota, home of Major League Soccer’s Minnesota United.

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