While Super Savers are concerned with inflationary impacts and a potential recession, most remain bullish they can withstand the short-term impacts—and actually plan to save more.
The annual Super Savers study from the Principal Financial Group found that nearly 6 in 10 (59%) survey respondents said they are on track to save more than $20,000 towards retirement in 2022, which is up from 51% in 2021. That’s largely attributed to the majority of Super Savers (82%)—defined as Gen X, Gen Y and Gen Z retirement plan participants saving 90% or more of the IRS maximum or 15% or more of their income for retirement—feeling confident they are well-positioned to endure a recession, as well as the sacrifices they are willing to make in their daily expenses to maximize their retirement contributions.
In addition, nearly half (47%) are looking to save more than $2 million by the end of their working years, with more than one in four (27%) anticipating more than 35 years in retirement.
“From continuing to save through an inflationary period to establishing long-term financial goals, Super Savers embody some of the best practices for retirement saving that gives them the mental and emotional strength to stick with their plans even during times of market uncertainty,” notes Sri Reddy, Senior Vice President of Retirement & Income Solutions at Principal. “Their savings habits go to show you can tuck away for the long-term while living in the moment today.”
Even with markets down this year, nearly half (45%) of Super Savers made no changes to their investments while those who did opted to:
- confirm their asset allocation aligns with investment risk (34%);
- review their asset allocation to verify proper diversification (25%);
- increase the amount invested into more aggressive investments (13%);
- move money from typically less risky investments into aggressive investments (11%);
- move money from investments experiencing a decline into less aggressive investments (7%); and
- move money into more liquid assets such as cash, bonds or CDs (6%).
What’s more, instead of making investment changes, two-thirds (67%) of Super Savers are making lifestyle changes to counter inflation, including adjusting entertainment and travel spending as well as reviewing spending habits and monthly budgets.
Shifting Priorities
When asked what their top financial priorities are over the next two to three years, paying off debt was No. 1 for Super Savers in 2021. However, the top priorities shifted in 2022 to focus mostly around increasing retirement savings.
Continuing to save more in an IRA (29%) jumped to the top of the list, while increasing the amount contributed to employer retirement plans tied for second with paying off debt at (25%).
These priorities are consistent generationally as continuing to save more in an IRA was in the top three financial priorities for Generations X, Y and Z. Increasing the amount contributed to employer retirement plans also placed in the top three priorities for Generations X and Z.
Views on Retirement
While the percentage of Super Savers who plan to fully retire (32%) is unchanged from 2021 to 2022, those who prefer a phased retirement spiked higher in this year’s survey.
According to Principal’s findings, the number of individuals who no longer plan to work in their main career but still earn an income working less than 40 hours per week now represent the majority at 54%—a 13% increase over 2021.
This coincides with a rise in the number of Super Savers who plan to retire before age 65—up 6% in 2022 to 66% overall. Both Generations Y and Z—who are still early in their careers—are the most eager to reach their sunset years. On average, Generation Y respondents are planning to retire at age 58 and Generation Z by 57.5. Nearly half (48%) of Gen Z respondents specifically plan to save more than $2 million overall by the end of their working years—which they say, on average, will be around age 57.
Information Sources
To execute their long-term retirement goals, Super Savers are primarily looking to financial institutions for support, Principal further notes. Their No. 1 trusted source for information is a financial professional (48%). Financial company websites or mobile applications (40%) and retirement plan service providers (37%) placed second and third, respectively.
Generations X and Y both prefer information from a financial professional primarily, while Generation Z relies on family and friends first (55%).
“Super Savers are savvy and perceptive, so it’s encouraging to see such a high percentage of them looking to financial experts for information and guidance,” adds Reddy. “No matter where an individual is at in their savings journey, it’s never too soon or too late to get support to ensure your personal finance situation and long-term goals are aligned.”
The survey was conducted online by Principal from June 24–July 5, 2022. Super Saver respondents included 1,120 retirement plan participants ages 18-57 with savings behavior of:
- contributing $17,550 or more to a retirement plan in 2021 (33%);
- deferring 15% or higher to their retirement plan (36%); or
- contributing $17,550 or more and deferring 15% or higher to their retirement plan (31%).
