Retirement Realities: Why Retirement Plans Are Evolving into Retirement Programs

By Randy Myers

The needs of American retirees are evolving. So are employer-sponsored retirement
plans—into retirement “programs” aimed at helping people achieve their goals to and through
retirement, suggests Chris Ceder, Senior Retirement Strategist at Goldman Sachs Asset

Speaking at the 2022 SVIA Spring Seminar in April, Ceder and his colleague Jeri Savage, head of
defined contribution research for multi-asset solutions, shared findings from a recent survey by
their firm which showed that Americans face numerous hurdles to a secure retirement, from
unexpected financial hardships to early retirement forced by poor health.
The survey drew responses from 613 workers between the ages of 21 and 56, as well as 624
retirees between the ages of 60 and 75. Four key findings emerged from the research:

Workers often don’t get to save for retirement as long as they had anticipated,
potentially jeopardizing their retirement plans.
Fifty-one percent of the retirees
surveyed had retired earlier than expected, with health issues the most common
explanation. “Retiring earlier than you planned has implications,” said Savage. “There’s
less time to save and catch up on your savings, which speaks to the importance of saving
early.” Only 3% of survey respondents said they worked longer than expected.

Other financial responsibilities often get in the way of saving for retirement. More
than 75% of working survey respondents said other financial priorities impacted their
ability to save, including ordinary monthly expenses and debt but also unexpected
financial hardships and time spent out of the workforce, to provide childcare or elder
care. Sixty-seven percent of retirees said they or their spouse had experienced a
financial hardship that caused them to stop saving for retirement, including 19% who
stopped saving for three or more years. Forty percent of workers said they or their
spouse had taken time away from the workforce to provide care for a family member.
Of that group, 40% said they had dipped into their retirement savings as a result.

Losing a steady paycheck is the most common concern of workers when entering
Twenty-eight percent of retirees identified this as a concern, outpacing
worries about having sufficient savings (22%), healthcare needs (17%), and receiving
Social Security benefits (12%).

Retirees’ top concerns today are around future healthcare needs, potential reduction
in Social Security benefits, and inflation.
The survey was taken in July and August 2021
when inflation was running at about a 5.4% annual rate. By March 2022, the inflation
rate had spiked to 8.5%, likely exacerbating retirees’ concerns about how well their
spending power will hold out in retirement. Inflation remained high—8.3%—in April.

The survey also uncovered intriguing differences in how different generations think about
retirement, with potential implications for their success in retirement planning. For example,
25% of survey respondents between the ages of 21 and 24 said they plan to retire before the
age of fifty-five. Younger workers also anticipate they’ll need a smaller percentage of their pre-
retirement income after they stop working than do older workers, which Savage suggested may
[be too aggressive and lead to under saving in early years] represent wishful thinking.
The survey also revealed different thinking by gender around retirement issues. For example,
women said they expect to work longer than men, but among retirees, women were more
likely than men to have retired earlier than planned. Women also expressed a greater
preference for guaranteed income in retirement, while men were more likely to value

With Americans increasingly responsible for funding their own retirement via defined
contribution retirement savings plans, converting a nest egg into retirement income has
become a critical challenge for them. When asked which income features were most important
to them (beyond what they receive from Social Security), current workers were most likely to
cite consistent and steady income (53%), followed by an ability to generate income that is not
guaranteed but provides the flexibility to access to savings throughout retirement if needed
(42%) and maximizing the amount of monthly income received (41%). Retirees, who are already
wrestling with the realities of retirement, saw things a little differently. They, too, were most
likely to prioritize consistent and steady income (55%), but next in importance to them was
having income that is guaranteed for their own life of the life of their spouse (37%).

“That’s something to think about in terms of how we address that as an industry,” said Savage,
who encouraged employers and the retirement industry to see the survey findings as an
opportunity to make improvements in retirement programs and products. Among other things,
she said, that could include recognizing that diversity needs to impact plan design, as different
people have unique needs.

Goldman Sachs Asset Management, Ceder concluded, is leaning into the survey findings as it
thinks about the future of retirement and retirement plan design features, and about how it
can better help plan sponsors understand and meet the needs of plan participants.