The “New Economics of Retirement”: Why Advisors Must Rethink the Math

The Rising Cost of Retirement Readiness 

Goldman Sachs Asset Management’s 2025 Retirement Survey & Insights Report paints a sobering picture of the new retirement landscape. Rising costs in housing, healthcare, education, and caregiving have far outpaced wage growth since 2000 — squeezing household budgets and leaving less room for retirement savings. 

The firm calls this reality the “new economics of retirement.” The data shows that the cost of basic needs as a share of income has surged, and key life milestones are being delayed. The average age for first-time homebuyers, marriage, and parenthood continues to climb, reflecting how affordability pressures ripple across financial planning decisions. 

For advisors, the implication is clear: many clients are not saving less out of indifference but out of necessity. As more Americans live paycheck to paycheck—even those earning six figures—the question isn’t just how much to save, but how to make saving possible at all. 

The Optimism Gap 

Despite these structural headwinds, optimism about retirement readiness is rising. Nearly 70% of workers in the survey feel confident they’re on track—yet almost 60% believe they’ll outlive their savings. This “optimism gap” reflects a tension between confidence and capability. 

Retirees report receiving about 60% of their pre-retirement income, and over 70% say they’re satisfied with that level—challenging the long-standing notion that every client needs a 70%–80% replacement rate. The survey suggests that lived retirement experiences may differ from industry benchmarks and that a more personalized, lifestyle-based approach may serve clients better than rigid ratios. 

Advisors can help close this gap by stress-testing income assumptions, recalibrating replacement targets, and focusing conversations on sustainability rather than single-number goals. 

The Affordability Crunch 

Roughly four in ten working Americans now live paycheck to paycheck, with another 40% only “moderately improving” each year. Financial strain is not limited to lower earners; even among households making over $300,000, nearly 40% say they struggle to get ahead. 

Major life events—having children, buying homes, or dealing with financial hardship—often force savers to pause contributions or tap retirement accounts. Over a lifetime, such interruptions can reduce total savings by 25%–40%, according to Goldman Sachs modeling. 

Advisors can help clients navigate these disruptions by reframing setbacks as part of the journey, not failures to be penalized. The report notes that “life is the way,” not a detour from saving—highlighting the need for flexible, adaptive plans that accommodate life’s turns while preserving long-term discipline. 

Rays of Hope: New Levers for Better Outcomes 

Despite these challenges, the report finds clear sources of optimism. Several strategies stood out for their measurable impact on retirement outcomes: 

• Early savings: Starting with even modest “seed” contributions—such as $500 annually from birth through age 20—can increase lifetime savings by 14%. 

• Plan access: Workers with 401(k) access had a 29% higher savings-to-income ratio than those without. 

• Personalized plans: Having a written, tailored plan correlated with a 27% higher savings-to-income ratio among retirees. 

• Financial Grit: Those identified with high perseverance and long-term focus (“Financial Grit”) accumulated nearly 50% more savings. 

• Lifetime income integration: Allocating 30% of savings to an annuity increased modeled retirement income by 23% compared to relying solely on withdrawals. 

These findings point toward a more holistic planning framework—one that blends behavioral support, plan access, and guaranteed income options to offset the drag of modern financial pressures. 

Takeaways 

• The “retirement math” is changing. Rising costs and longer lifespans demand more flexible and realistic planning assumptions. 

• Confidence isn’t preparedness. Many clients feel secure today, but may underestimate longevity and lifestyle costs. 

• Behavioral and structural supports matter. Early savings, access to plans, personalized advice, and financial grit all improve outcomes more effectively than blanket “save more” messages.

• Advisors can lead the reset. Helping clients balance near-term affordability with long-term readiness—through customized plans and lifetime income tools—will define the next era of retirement advice. 

Closing Thought 

The new economics of retirement challenge old formulas but also open new possibilities. Advisors who embrace behavioral insight, flexible plan design, and diversified income strategies can help clients not just survive these shifting dynamics—but build confidence and resilience in the process.