The pandemic is not only impacting consumers’ day-to-day lives, but it’s leading some to adjust their long-term retirement strategies.
The fallout from COVID-19 has led to job losses, reduced income and other financial challenges for consumers across the country. To gauge how those challenges are impacting retirement planning, wealth management company Personal Capital surveyed consumers of varying age groups and at different points in their career.
While workers of all ages suffered losses to their retirement account balances during the pandemic, some may have to scrap their current plans entirely.
A rise in retirement uncertainty
Of the respondents planning to retire within the next 10 years, 89% said they were worried about the financial impact of the pandemic on their retirement savings. Nearly a third — 32.6% — said they were “very worried” or “extremely worried.”
While 63% of respondents who planned to retire in the next 10 years said they had felt like they were on track for retirement before the pandemic, that percentage dropped to 52% after the coronavirus outbreak hit.
For some of those planning to retire within 10 years, the pandemic has derailed their plans entirely, with 40% saying their plans would be delayed because of the impact of COVID-19 on their finances. On top of that, 49% said their retirement will look different financially because of the pandemic and 38% said they won’t be able to live the retirement lifestyle they had expected to live because of COVID-19.
Younger workers also affected
Consumers of all ages saw their retirement account balances plummet during the pandemic, but younger investors took the biggest hit. Between Jan. 31 and March 31:
- Those in their 20s averaged a 12.9% drop to their retirement account balances
- Those in their 30s saw on average a 13.8% decrease
- Those in their 40s averaged a 12.8% decline
- Those in their 50s averaged an 11.7% drop
- Those in their 60s averaged a 10.1% decrease
- Those in their 70s averaged a 8.5% decline
- Those in their 80s saw their balances fall on average by 5.8%
Among respondents who were more than 10 years away from retirement, 77% had some concerns about how the pandemic would affect their retirement.
More than one in five — 21% — of respondents more than 10 years out from retirement even stopped or reduced their retirement contributions during the pandemic while another 30% said they had considered doing so.
Retirees face hardships too
Those who are still working were not the only ones to experience the crush of economic anxiety during the pandemic. Those who have already retired are also feeling the effects. More than a third — 37% — of retirees said they have experienced financial hardship as a result of COVID-19, and 25% said it is “somewhat” or “very” likely that they will return to the workforce because their financial situations have deteriorated due to the pandemic.
Among those who said they may have to come out of retirement:
- 49% said they would work for a company or some other employer
- 51% said they would work for themselves
Methodology: Content marketing company Fractl surveyed 1,004 adults on behalf of Personal Capital. Respondents were divided in three groups: those planning to retire in the next 10 years, those planning to retire in the next 10 years and those who were already retired.