The COVID-19 pandemic has made Americans worry more about just about everything—so why should their prospects for a comfortable retirement be any different?
A majority of today’s workers and retirees range from feeling cautious to pessimistic about the economic outlook for 2021, with nearly 75% concerned about how the global pandemic may impact their retirement savings, according to the latest Principal Retirement Security Survey.
The Q4 2020 study, released Jan. 4, gauged consumer concerns and actions around saving for retirement, financial plans, and reactions to COVID-19 and the accompanying market and economic impacts.
Consumers say health and financial security are their two top priorities this year. They also expressed a need for advice as they navigate their financial plans. And despite citing uncertain feelings about what 2021 may bring, workers and retirees reported high overall happiness during the fourth quarter of 2020 (85%) that’s consistent with 2020 pre-pandemic findings (86%). In addition, 71% of workers and 87% of retirees said they’re confident they’ll remain in a positive state of mind for the next few months.
How to improve financial health
Nearly 75% of workers anticipate the pandemic is impacting their path to retirement, and the same percent of retirees anticipate an impact on their accumulated retirement savings. As a result, both workers and retirees plan to make changes to help improve their financial health, such as:
- spending less (35%)
- saving more (29%)
- paying down debt (25%)
2021 worker, retiree priorities
Poised with caution and maintaining a positive outlook toward the coming months, workers and retirees surveyed called attention to what they feel is most important in life, notably:
- health (56%)
- financial security (49%)
- having a close-knit family (35%)
How to boost retirement confidence and preparedness
The percentage of respondents who work with financial professionals jumped several percentage points compared to pre-pandemic survey findings—from 37% (Q1) to 40% (Q4) for workers, and from 45% (Q1) to 57% (Q4) for retirees. Based on the survey results, Principal identified several notable areas in which financial professionals and those in the retirement industry may be able to offer valuable support to help individuals feel more prepared for retirement.
- Help improve the retirement picture. Over 60% of workers do not feel prepared to imagine their life in retirement and more than half say they do not know how they’ll spend their time once they retire.
- Support development of a retirement savings plan. Nearly 50% of workers surveyed do not feel prepared to plan their retirement income or to make the most of their retirement. And, only 14% of them feel very confident they’ll have enough money saved to live comfortably.
- Meet consumers where they are on their financial journey. Retirees and workers alike cite two common areas in which they need financial advice: investment selection (29% of workers and 30% of retirees) and how to manage retirement savings once they have retired (41% of workers and 30% of retirees). Retirees say the topics of Medicare and Medicaid plans are a top financial advice need (30%), while workers cite needing help determining when to start receiving Social Security benefits (31%).
- Increase education about guaranteed income. Retirees using guaranteed or anticipated income sources during the COVID-19 pandemic say it has enabled them to feel their basic expenses are covered (89%) and be less concerned during bouts of market volatility (56%). While many retirees are benefiting from guaranteed lifetime income sources, there continues to be a need to increase education and access to these solutions to help more Americans feel more secure about retirement.
To access the full Q4 2020 report, click here.