Long-Term Retirement Repercussions of the Pandemic
January 7, 2021
One in five U.S. workers (21%) indicate their confidence in their ability to retire comfortably has declined in light of the coronavirus pandemic, and only 27% are very confident that they will be able to fully retire with a comfortable lifestyle, according to a new survey report released by nonprofit Transamerica Center for Retirement Studies (TCRS).
“Before the pandemic, the retirement prospects for many workers were iffy at best. The pandemic has exacerbated that situation. Millions of workers have experienced negative impacts to their employment, ranging from pay cuts and furloughs to job loss. Some workers have even dipped into their retirement accounts to make ends meet,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “It will take years for many workers to financially recover—and some may never recover. Help from policymakers is needed to strengthen the U.S. retirement system.”
Retirement Security Priorities for the New President and Congress
When asked what the priorities for the new president and Congress should be, workers cited:
- Strengthening safety nets and improving health care, including addressing Social Security’s funding shortfalls (49%)
- Making out-of-pocket healthcare expenses and prescription drugs more affordable (47%)
- Addressing Medicare’s funding shortfalls (42%)
- Innovating solutions to make long-term care services and supports more affordable (37%)
Other priorities cited by workers include:
- Expanding access to employer-sponsored retirement plans, IRAs, and other savings programs (36%)
- Implementing financial literacy curriculum in schools (34%)
- Increasing access to affordable housing (34%)
- Expanding the Saver’s Credit (32%)
- Creating incentives for individuals to obtain ongoing training and education (32%)
- Allowing employers to match employees’ student loan payments as a contribution in their retirement accounts (29%)
The Pandemic’s Impact on Workers’ Short-term Finances and Long-term Security
The October 2020 survey gauges the impact of the pandemic on workers’ employment and finances. It finds:
- Approximately half of workers (52%) have experienced one or more negative impacts to their employment including job loss, furloughs, reduced hours, reduced pay, and/or retiring early. LGBTQ workers are among the most impacted.
- 65% of LTBTQ workers have experienced one or more negative impacts to their employment, compared with only 50% of non-LGBTQ workers.
- As a result of the pandemic, 33% of all workers have already and/or plan to take a loan and/or withdrawal from their qualified retirement account such as a 401(k), 403(b), or similar plan or IRA.
- LGBTQ (59%), urban (50%), Millennials (43%), and men (42%) are among the workers more likely to be dipping into their retirement savings.
- Credit card debt may pose a threat to retirement security for many, especially Generation X. 34% of all workers cite paying off credit card debt as a financial priority, including 45% of Generation X workers. Moreover, if their finances have been or were to be negatively impacted by the pandemic, 35% of Generation X workers indicate they would rely on credit cards.
The survey offers encouraging news of workers’ commitment to saving for retirement amid the pandemic:
- Three in four workers (75%) are saving for retirement through their current employer’s 401(k) or similar Full-time workers (86%) are significantly more likely to be saving than part-time workers (67%).
- Despite competing financial priorities, almost half of workers (47%) cite saving for retirement as a priority. Baby Boomers (6%), college graduates (59%), full-time workers (5%), and suburban workers (55%) are among those more likely to cite it as a priority.
Lastly, the survey points to steps workers can take to improve their planning and safeguard their situation:
- Only 27% of workers have a written financial strategy for retirement. Those more likely to have a written strategy include LGBTQ (41%), college graduates (40%), and urban (36%).
- Legal documentation is lacking. Amid the pandemic, it has become even more important to have financial and medical-related legal documents in place. Only 22% of workers have a medical power of attorney or proxy. College graduates (30%) are more likely than non-college graduates (17%) to have one. Similarly, 27% of college graduates have a financial power of attorney compared with only 17% of non-college graduates.
“From a societal level to individual households, the pandemic has disrupted nearly every aspect of our lives and laid bare weaknesses in our retirement system. As we navigate the pandemic with an eye toward the future, policymakers, industry, employers, and individuals have a tremendous opportunity to work together and create a stronger, sustainable, and inclusive system in which everyone has the ability to live, work, and retire with dignity,” said Collinson.