Empower: Resilient Americans Taking Positive Steps to Manage Inflation

December 07, 2023 at 08:00 AM EST

Two-thirds have no plans to sell assets or investments.
69% don’t plan to reduce their retirement savings account contributions.
Workplace savers using managed accounts are saving 27% more.
Average account balances increased by 11%.

American workers are benefiting from higher savings account rates, a rebounding equity market from 2022 (although still marked by volatility) and a strong employment market.

However, economic and financial conditions have put considerable pressure on day-to-day finances, making it hard for many to pursue their longer-term goals.

Today, Empower released its third annual Empowering America’s Financial Journey™ – How People Save, Invest and Get Advice (EAFJ) study, which offers an account of how Americans are progressing on their journeys to financial freedom.

“Despite the economic challenges American workers are facing, it is reassuring that most are taking positive steps to pursue their financial goals,” said Edmund F. Murphy III, president and CEO, Empower. “Retirement planning is a lifelong commitment, and this study uncovers that 68% of working Americans are confident they will be financially ready for retirement. There is still progress to be made, but I am optimistic our retirement system is providing the tools and solutions that are helping individuals achieve good financial outcomes.”

Here are some findings:

Americans are taking prudent financial steps to manage the ongoing impact of inflation. More than half (56%) of Americans have spoken with or plan to speak with a financial professional. Two-thirds have no plans to sell assets or investments, and 69% don’t plan to reduce their retirement savings account contributions.

Retirement plan savings remain steady, but few Americans feel they are saving enough. Over the past year, the average retirement plan savings rate has stayed steady at approximately 8%. However, only 11% of Americans think they are saving enough. Needing to make ends meet and inflation are the top reasons why. Average account balances increased by 11% to $91,000 during that same period, a welcome change from the 27% decline the prior year.

Loan and hardship withdrawals are on the rise. New loans and hardship withdrawals taken in each quarter of 2023 were the highest in the past eight quarters. With credit card debt increasing, higher interest rates, elevated daily expenses, and student loan debt payments resuming, workplace savers need help managing their budgets. Further, 27% of Americans say they are very or somewhat likely to take out a loan or hardship withdrawal in the next six months.

Workplace savers using managed accounts are saving 27% more and are more engaged with their retirement plans than target date fund users. The usage of professionally managed strategies (managed accounts and target date funds) is highest with younger generations.

Americans have mixed feelings about Social Security’s role in their retirement income. The importance of Social Security to Americans’ retirements varies widely. While some Americans expect Social Security to be their primary retirement income source, others don’t expect Social Security to be there at all. 24% of Americans don’t expect Social Security to be there when they retire; that increases to almost 32% of Gen Zers not counting on Social Security to be available to them.

“We know that employees who are engaged savers, utilizing the tools and advisory services that many employers provide, do save more than those who are unengaged,” said Luis Fleites, marketing communications director for Empower. “This study uncovered that more than 90% of workplace savers value these tools and access to unbiased advice.”

Opportunities we need to support

Gender savings gap

Men’s average account balances are 50% higher than women’s.
29% of Hispanic women consider saving for retirement a top goal compared to 62% of Hispanic men.
43% of Hispanic women are saving less than 3% or nothing at all.
29% of Black women feel less confident, more than double of Black men (13%).

Getting Gen Z on track

Gen Zers are saving 43% less than baby boomers and have the lowest engagement rates, and 36% aren’t maximizing their employer-matching contribution.
Gen Z is the only generation for which saving for retirement is not the top financial goal: More Gen Zers prioritize paying off debt (37%) than saving for retirement (28%).

Key takeaways for savers

Retirement savings is a lifelong journey. Consider focusing on maximizing retirement savings based on your financial situation and retirement goals.
Don’t fall behind or feel overwhelmed. Seek help navigating the current economic environment.
Retirement isn’t just about paying the bills. Plan for your income and emotional needs in retirement.

About the study

This year’s study analyzes the behavior of 5.3 million (primarily corporate 401(k)) defined contribution workplace savers with Empower as the recordkeeper. The survey was conducted by FGS Global on behalf of Empower. This nationally representative online survey of full-time employees at for-profit companies with access to a defined contribution (DC) plan offered by their employer was conducted in August 2023 with a sample size of 2,511 working Americans between the ages of 18 and 70. Data were weighted by age and gender to match Census distributions for adults ages 18 to 70 who are employed full-time. Weights for this wave were based on 2022 CPS (Current Population Survey) data. Specifically, the latest available CPS

Annual Social and Economic (March) Supplement. All the findings from the survey represent weighted values to be representative of full-time employees at for-profit companies across gender and generation.

Learn more – Empowering America’s Financial Journey

ABOUT EMPOWER

Recognized as the second-largest retirement recordkeeper in the U.S.,¹ Empower is a leading provider of financial services, including advice, wealth management, investing and retirement services. Headquartered in Greenwood Village, Colo., Empower administers approximately $1.4 trillion in assets for more than 18 million investors.² Connect with us on empower.com, Facebook, Twitter, LinkedIn, Tik Tok and Instagram.

1 Pensions & Investments 2022 Defined Contribution Survey. Ranking measured by total number of participants as of September 2022.

2 As of June 30, 2023. Information refers to all retirement business of Empower Annuity Insurance Company of America (EAICA) and its subsidiaries, including Empower Retirement, LLC; Empower Life & Annuity Insurance Company of New York (ELAINY); and Empower Annuity Insurance Company (EAIC), marketed under the Empower brand. EAICA’s consolidated total assets under administration (AUA) were $1,387.9B. AUA is a non-GAAP measure and does not reflect the financial stability or strength of a company. EAICA’s statutory assets total $73.98B and liabilities total $70.1B. ELAINY’s statutory assets total $7.2B and liabilities total $6.9B. EAIC’s statutory assets total $90.1B and liabilities total $88.8B.

Securities, when presented, are offered and/or distributed by Empower Financial Services, Inc., Member FINRA/SIPC. EFSI is an affiliate of Empower Retirement, LLC; Empower Funds, Inc.; and registered investment adviser Empower Advisory Group, LLC. This material is for informational purposes only and is not intended to provide investment, legal, or tax recommendations or advice.

Empower refers to the products and services offered by Empower Annuity Insurance Company of America and its subsidiaries. “EMPOWER” and all associated logos and product names are trademarks of Empower Annuity Insurance Company of America.

Learn more:

To learn more about how we’re empowering plan sponsors and their participants to be more engaged in their retirement plans than ever before, call us at 800-719-9914.