Goldman Sachs Warns: The Retirement Math No Longer Works—Even For The Rich – Financial Freedom Countdown

Goldman Sachs’ 2025 Retirement Survey & Insights Report paints a sobering picture of the American retirement landscape.

The traditional wisdom of “save more and you’ll be fine”; is increasingly out of touch with the financial pressures millions of Americans face.

The firm calls it the “new economics of retirement,” and it challenges one of the nation’s most deeply held assumptions: that diligent saving alone guarantees security.

Does the Retirement Math Still Work?

For years, financial advisors have encouraged a simple formula: contribute consistently, let compounding work, and expect stability in later years. But that math is breaking down. With housing, healthcare, education, and caregiving costs far outpacing wage growth since 2000, Goldman’s researchers argue that it’s no longer possible for many households to balance immediate needs with long-term savings goals.

A Structural Shift in the Cost of Living

Since 2000, median wages have climbed modestly; while core costs have exploded.

Housing prices have more than doubled in many markets, childcare costs have surged 200%, and college tuition continues its relentless climb.

The result: the average worker’s discretionary income has shrunk, leaving little left for retirement contributions.

Affordability Is Now the Central Challenge

Retirement affordability has become the new benchmark of readiness. It’s no longer about how much you earn, but how much of your paycheck survives the monthly squeeze.

Four in ten workers making more than $500,000 a year report living paycheck to paycheck; a sign that “lifestyle inflation” and soaring living costs are eroding financial progress at every level of income.

Major Life Milestones Delayed

The impact of rising costs is visible in the way Americans live. Young adults are waiting longer to get married, buy homes, or have children.

The median age for first-time homebuyers and new mothers has risen steadily. For many, these choices aren’t about preference; they’re about affordability.

Retirement Itself Is Getting More Expensive

Even for those who make it to retirement, costs continue to rise faster than inflation.

The Bureau of Labor Statistics reports that retirees’ annual expenditures have grown 3.6% per year since 2000.

And as life expectancy increases; from an average 17.5 years in retirement in 2000 to a projected 21 years by 2043, many will face longer, more expensive retirements than their parents ever did.

The “Optimism Gap” Between Confidence and Reality

Goldman’s survey found that while nearly 70% of savers feel optimistic about their retirement prospects, 58% believe they’ll outlive their savings.

Confidence remains high; but it’s built on shaky ground. Many workers underestimate how long they’ll live, how much they’ll spend, and how much they’ll need to maintain their lifestyles.

Savings Are Up; but Income Targets Are Too Low

More than half of respondents increased their retirement contributions in the past year.

However, their income replacement targets; the percentage of working income they aim to replace in retirement; are strikingly low.

Most plan for less than 60% of their working income, well below the 70%–80% typically recommended by experts.

Retirees Are Doing Better Than Expected; For Now

Interestingly, 71% of retirees say they’re satisfied with their income, and 82% report living as well as or better than before retirement.

On average, retirees live on about 60% of their pre-retirement income.

Yet this satisfaction may mask future risks, as inflation and longevity continue to outpace savings growth.

The “Financial Vortex” Still Pulls Workers Off Track

Goldman’s behavioral economists describe a “Financial Vortex”; a swirl of competing priorities that continually pull savers away from long-term goals.

Since 2020, the vortex has moderated somewhat; but inflation, market volatility, and tariff effects in 2025 have reignited financial stress for many households, especially younger workers.

Generational Divide: Millennials and Gen Z Are Hit Hardest

While 30% of Baby Boomers say financial obligations limit their saving, that number rises to over 70% among Millennials and Gen Z.

These generations face steep housing prices, student debt, and rising living costs without the safety net of pensions, making retirement saving a distant goal.

Paycheck-to-Paycheck Living Is Widespread

Roughly 40% of working respondents say they live paycheck to paycheck.

Among high earners, the number remains surprisingly high; about 40% of those earning more than $300,000 report the same.

Lifestyle inflation, debt, and housing costs are keeping even affluent Americans from meaningful saving progress.

Life Events Keep Knocking Savings Off Course

Two-thirds of Gen Z and nearly 60% of Millennials reported major life events; like childbirth, buying a home, or job loss, within the past two years.

Around 70% said they paused or reduced retirement contributions as a result.

Retirement Affordability Is Declining

Workers living paycheck to paycheck show the weakest savings-to-income ratios, while even moderate earners struggle to build momentum.

With 64% of Americans reporting they live paycheck to paycheck at least some of the time, Goldman warns the problem is now structural, not temporary.

Early Savings Tools Could Be Game Changers

Goldman highlights the potential of early-start accounts; like “Trump Accounts,” a new savings vehicle allowing up to $5,000 in annual contributions for children.

Even small early contributions can compound into six-figure sums by retirement, illustrating the long-term power of early investment.

Access to 401(k) Plans Still Drives Outcomes

Workers with access to a 401(k) or similar employer plan have, on average, 29% higher retirement savings-to-income ratios.

Expanding access through pooled employer plans and auto-enrollment remains one of the clearest paths to improving national retirement readiness.

If you’re over 50, you can save an extra $7,500 annually in your 401(k) and $1,000 more in your IRA for 2025. Every bit helps.

“Financial Grit” Separates Successful Savers

The report introduces a key behavioral concept: Financial Grit.

Those who exhibit resilience, adaptability, and long-term focus hold, on average, 49% more in retirement savings than peers with low grit.

Mindset, it turns out, is as powerful as income in predicting retirement outcomes.

Higher Returns Can Reduce Pressure to Save

Goldman’s modeling shows that adding modest allocations to private equity and private credit could boost long-term returns by roughly 0.5 percentage points annually; enough to increase end-of-career savings by 14%.

For plan sponsors, this means exploring new investment menu options beyond traditional stocks and bonds.

Personalized Retirement Plans Boost Savings by 27%

Workers and retirees with personalized retirement plans show significantly stronger outcomes: 15% higher savings-to-income ratios for workers and 27% higher for retirees. Yet only three-quarters of plan sponsors currently offer personalized planning tools; leaving a major opportunity gap.

Blending Insurance and Investments Can Stretch Income

For retirees, combining investment portfolios with annuities can raise income sustainability.

Annuities often pay 7% annually; far more than the standard 4% withdrawal rule; providing stability against market downturns and longevity risk. The key, Goldman suggests, is blending flexibility with guarantees.

Retirement Is Being Redefined

Goldman’s 2025 findings confirm what many Americans already feel: the old formulas no longer add up. With rising costs, longer lives, and shifting priorities, retirement planning now requires grit, creativity, and structural innovation.

The question isn’t just how to save more; but how to make saving itself possible in a world where every dollar already has a job.

Financial experts recommend treating your retirement contributions like a monthly bill, instead of saving whatever’s “left over” each month. If you do not have a budget, start now by using a free tool like Personal Capital from Empower to automatically create a budget based on your current spending.

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