One in five Americans say they will have to delay retirement—or not retire at all—as a result of the pandemic, according to a new survey by Nationwide. Their retirement prospects could be further compounded by taxes, as few respondents are considering the impact that future taxes will have on their retirement income.
Related: 82% Say Pandemic has Negatively Impacted Retirement Plans
The 2021 Tax-Efficient Retirement Income survey found 27% of Americans have had to stop saving or save less since the pandemic, and 37% have had to draw on retirement savings or think they probably will have to. On top of that, 47% believe their taxes will increase significantly over the next four years.
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Nationwide found 62% of respondents think now’s the time to develop a strategy to address taxes in retirement. However, 42% say that COVID-19 has made tax planning more complicated than in the past. Fifty-seven percent said they rarely think about taxes in retirement, according to the survey.
“The worries retirees have about taxes in retirement should serve as a warning to non-retirees. Too many Americans aren’t considering or knowledgeable about building flexibility into a retirement income plan and this can have costly repercussions down the road,” Eric Henderson, President of Annuities at Nationwide, said in a statement. “There’s an opportunity to bridge the education gap on how different investment and retirement vehicles, such as taxable, tax-deferred and tax-free accounts, can help effectively manage retirement income.”
Related: Wealthy Retirees Will Lose Almost 25% of Retirement Income to Taxes
Half of respondents said they would switch advisors for someone who could help them plan for taxes in retirement, and 31% say they aren’t getting the advice they need.
Young Workers Worse Off
Millennials were more likely than other age groups to say they have had to make early withdrawals from their retirement accounts, or that they don’t understand tax planning. Fifty-eight percent of millennials reported taking or planning to take an early withdrawal; the same percentage said paying taxes has gotten more complicated.
However, younger respondents were also more likely to turn to professional help. Almost half of millennials and 32% of Gen X started working with an advisor for the first time during the pandemic, compared to 12% of boomers.
“COVID-19 has many Americans feeling financially insecure—especially younger ones,” Henderson said. “This presents an opportunity for financial professionals to not only get clients back on track, but ensure they have the right tools and education on topics like taxes in retirement, which can get them closer to their long-term goals.”
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