Growing Retirement Concerns

Growing Retirement Concerns

As more data becomes available about the economic impact of the coronavirus on retirement planning, multiple studies have shown that retirees and individuals nearing retirement age were not as negatively impacted through their retirement plans as one might expect. While this is the good news, the bad news is that there still is a retirement crisis taking place in the United States. Prior to the pandemic, Americans nearing retirement were struggling to adequately save, forcing some to delay their retirement plans which has caused stress among individuals in the senior population. Although the pandemic continues to affect the country, mass vaccinations have put the country on a path to recovery and certain indicators have shown a healing economy. 

A 2021 retirement preparedness study found that during the pandemic, setting money aside for retirement was among the top priorities for savers. The lowest priority for respondents was focusing on their investment portfolios with 49% of respondents between the ages of 45 and 75 stating that they did not know how the assets in their investment portfolios were allocated. This statistic is concerning for individuals planning for retirement because it shows that nearly one half of investors nearing the end of their career do not have control over their investments or the knowledge to maintain their investments and are therefore leaving themselves at risk. 

Although saving money was a high priority for individuals in and nearing retirement, according to this study, 60% of respondents felt as if they did not have enough money saved. While the pandemic certainly slowed most working individuals’ ability to put money away for retirement, researchers found that although saving money was a high priority for Americans, not many savers had a retirement plan in place. More than 70% of respondents stated that they did not have enough assets to justify creating a retirement plan. While this data does seem contradictory to respondents saying that saving for retirement was a priority, it shows that there is a lot of confusion about where the economy is heading, what the future will hold for most retirees, and highlights how insecure the process of retiring has become for Americans. The data also lends credence to the importance of working with trusted financial advisors who specialize in retirement planning, which this study did not analyze. 

Furthermore, the same study underscored several retirement issues that respondents were worried about saving for, including higher healthcare costs bankrupting their nest egg, preserving their nest egg in retirement, and protecting themselves from a market crash. After collecting this data, the surveyor’s asked a broad question about living in retirement and 47% stated that they were comfortable, but less than 5% of those who said they were comfortable said that they were living the dream. This study was similarly aligned with data released from the Employee Benefit Research Institute (EBRI) which has conducted several studies throughout the course of the pandemic to analyze respondents’ feelings and preparedness for retirement. Interestingly however, EBRI’s study group was more content with their retirement situations and found that more respondents were staying true to the retirement plan that they had formulated during their working career. 

The EBRI research focused specifically on retirement age individuals between the ages of 62 and 75 and narrowed their focus on how people in this age group spend money during retirement. EBRI found that more than 45% of survey respondents felt that they had saved less money during their working career than the amount that they need to satisfy their retirement needs — 18% felt that they saved more than what they needed. The study also looked at what was most prioritized by the respondents in terms of safeguarding their nest egg in retirement. 81% of the respondents stated that their top priority was maintaining their health in retirement and having enough assets to cover healthcare related expenses. 

It may be some time before economists and researchers have a full range of data to depict the true effects of the pandemic on retirees and their nest eggs, but recent studies have shown that the shutdowns and drop-in economic activity did not have as much of a drastic impact on saving for retirement. The data from both studies indicate that there are still complications with saving and peace of mind as most retirees still find themselves worrying about whether they have enough money to last their lifetime and cover certain expenses. Instead of focusing on traveling and spending time with families, retirees in the EBRI study were focusing on not spending down their assets so they have a high balance to cover unexpected expenses like the high cost of medical care. 

Younger savers like the ones depicted in the first study showed evidence of general confusion when it came to saving for retirement. Saving money was a high priority for respondents during the pandemic, but they did not pay much attention to where their assets were being allocated in their portfolio and did not feel as if having a retirement plan was justifiable if their assets did not reach a certain level. This raises the question about having a financial advisor which neither study covered but could certainly help savers in and near retirement develop a plan regardless of the size of their assets. Retirement preparedness was a large issue for the United States prior to the pandemic of 2020 and going forward it looks like it will continue to be an issue for retirees and those preparing for retirement.