Skip to main content

You are here


How the Ongoing ‘Financial Vortex’ Threatens Retirement Readiness

Industry Trends and Research

There’s some good new and some bad news in Goldman Sachs Asset Management’s (GSAM) just-released retirement report, which examines how plan participants are preparing for, transitioning to, and managing their finances in retirement.

Image: Shutterstock.comOn a positive note, more U.S. workers over the last year have increased their savings, and more believe their retirement savings are on track. To that end, nearly two-thirds (65%) of U.S. workers are confident in their ability to meet retirement savings goals, up from 57% last year, according to the firm’s 2023 retirement survey and insights report, Diving Deeper into the Financial Vortex: A Way Forward.

Yet, despite improving financial conditions, working respondents report no improvement in balancing competing financial priorities with their retirement savings. In fact, the prevalence of competing responsibilities has increased considerably compared to the retired population. Consider that one in five working respondents believe competing priorities will delay their retirement by four or more years, according to the findings.

In this year’s survey, more survey respondents indicated that factors such as credit card debt, saving for college, and supporting family members have affected their ability to save for retirement. Notably, over the long term, financial vortex challenges could reduce U.S. employee retirement savings by up to 37%, GSAM notes.

“Only 36% of U.S. workers have three months of income or more saved for emergencies,” says Chris Ceder, Senior Retirement Strategist at GSAM. “Unplanned and often unpredictable financial challenges push too many of us off track, and catching up may be difficult. Saving for retirement must remain a top priority,” he emphasizes.  

Unexpected Events Lead to Unexpected Consequences

As to the impact of the financial vortex, working respondents reported a higher number of instances in 2023 of caregiving, cash-outs, and financial hardships, further evidencing the changing landscape retirement savers need to navigate:

  • 44% cashed-out retirement savings at least once upon a job change (up from 42%)
  • 42% stopped saving for retirement due to a financial hardship (up from 33%)
  • 39% left the workforce to provide caregiving (up from 22%)
  • 22% left their full-time job for a part-time job to provide caregiving (up from 10%)

Not being able to retire when workers want is another major issue. Consider that, among retirees, 50% reported that they retired earlier than expected. And within that group, 47% retired for reasons outside of their control (most often for caregiving or poor health), and 54% retired more than four years earlier than expected.

Emergency Savings and Financial Planning  

In looking at the actions individuals and employers can take to manage the impact of the financial vortex, GSAM notes that emergency savings is a key factor. Those with money saved for emergencies were far less likely to say the vortex hampers their ability to save for retirement, the report notes.

What’s more, having a solid financial plan for retirement is also a critical tool, the report suggests. In this case, GSAM found that roughly 8 in 10 workers (79%) with a plan report that their retirement savings are on track or ahead of schedule, compared to only 34% for those without a plan. Moreover, 60% of those without a plan report being behind schedule, compared to only 21% with one.

In addition, retirees with a retirement financial plan are less likely to have less than 50% of their working income (34% with a plan vs. 48% without), and 37% have income greater than 70% of pre-retirement income levels, compared to 24% of retirees without a plan. Among those with a plan entering retirement, 78% feel confident making the transition, compared to 56% without one.

Consequently, employees may need a wider range of services, including financial education, financial resiliency and especially personalized planning services, the report suggests.

“To help address the needs of employees, forward-thinking employers are looking to offer effective financial planning through their benefit programs that accounts for individual circumstances and life experience,” says Kathy Barber, head of Corporate Benefits & Compensation at Goldman Sachs Workplace and Personal Wealth. “These benefits can raise confidence, reduce stress, increase financial literacy, and improve overall satisfaction with savings, while heightening the ability to deal with life’s challenge.”

What Employees Want 

Turning to what employees want from their employers, here the findings suggest that retirement income is a top concern for retirees, and many plan sponsors are increasingly interested in having retirees keep their savings in their 401(k) plan in retirement. GSAM notes that, while employer-sponsored retirement plans were a top source of education and advice pre-retirement, in retirement that status dropped to fourth.

When asked what plan features and services are most important to keep their savings in their employer’s 401(k) plan post-employment, working respondents and retirees most value guaranteed income options (43% and 38%), and retirement tools and calculators (36% and 32%).

“Income resources can help anchor the retirement that many work so hard to prepare for,” said Chris Lyon, head of Defined Contribution for Goldman Sachs Asset Management. “Plan sponsors have an incredibly valuable role in supporting employees with decumulation strategies critical to the next generation of 401(k) plan design.”

Respondents also want more help from employers with immediate financial challenges. Emergency savings was the top choice for plan design enhancements, along with professional financial planning advice services (36% each), followed by guaranteed income options (33%).

“More than ever, there is no one path or solution that solves every retirement concern for all,” added Lyon. “Yet these challenges, even those that are unexpected, bring with them opportunities for employers to provide workers and retirees with more integrated, personalized, and effective solutions that can help support their retirement goals.”

The findings are based on a July 2023 survey conducted by GSAM and Qualtrics Experience Management among 5,261 U.S. individuals (3,673 workers and 1,588 retirees).