Despite recent optimism over vaccine success and the possibility of a return to normal—however defined—nearly seven in 10 Americans who experienced the 2008 recession believe the COVID-19 pandemic will have a greater overall economic impact.
Additionally, more than two-thirds of retired respondents said they retired earlier than expected, up from 50% in 2020, with the majority doing so for reasons beyond their control. And almost two-thirds said they are now paying more attention to what they are saving and spending.
More specifically, recent Allianz Life research found that Americans are feeling greater anxiety on a variety of topics, including:
| Great Recession | COVID-19 | |
| Nervousness about day-to-day finances | 39% | 61% |
| Nervousness about retirement savings | 34% | 66% |
| Professional career | 42% | 58% |
| Saving and spending money | 39% | 61% |
| Managing market risk when saving for retirement | 40% | 60% |
“Although the full story of this pandemic won’t be known for some time, it’s clear that the financial security of many Americans has been severely compromised,” Kelly LaVigne, vice president of Consumer Insights with Allianz Life, said in a statement. “It is notable that so many people are concerned about both the short-term and long-term financial effects of this crisis. It’s crucial that Americans use this opportunity to consider any new risks that could affect their retirement planning and develop strategies to help mitigate those risks and future unexpected events.”
Trend toward unexpected retirement continues
The 2021 Retirement Risk Readiness Study found that more than two-thirds of respondents said they retired earlier than expected, up significantly from the 50% who acknowledged earlier-than-expected retirement in last year’s study.
Similar to 2020, the majority said they had to retire for reasons outside of their control, including healthcare issues (33%, up from 25% in 2020) and unexpected job loss (22%, down from 34% in 2020).
Early retirement may put them at greater risk given that more than four in 10 (43%) Americans said they are unable to put away anything for retirement right now (up from 37% in 2020), and a similar amount (42%) feel that they are too far behind on their retirement goals to catch up (up from 31% in 2020).
Unfortunately, Americans continue to have unrealistic expectations when it comes to managing an early end to their employment via working in retirement.
A full 70% of non-retirees think it is likely they will work at least part-time in retirement, up from 65% in 2020. Yet, when asked if they actually are working at least part-time in retirement, even fewer retired respondents verified that claim – only 6%, nearly equal to the 7% reported in 2020.
In fact, the closer people are to retirement, the less enthusiastic they are about the idea of extending their employment. When asked if they would rather retire at age 55 and have their basic expenses covered in retirement or work until age 75 and live more extravagantly in retirement, less than a quarter (23%) of retirees said they would prefer to work longer (versus 32% of near-retirees and 48% of pre-retirees).
Pandemic silver linings for retirement planning
It’s clear that the pandemic has caused financial strain, as nearly half of all respondents said they can’t even think about saving for retirement now because they are just trying to get by day-to-day and 56% said that stock market swings are making them nervous about their retirement savings.
However, there are signs of hope, as almost two-thirds (65%) said they are now paying more attention to what they are saving and spending, and nearly six in ten (58%) have cut back on their spending.
Furthermore, the pandemic has motivated those nearest to retirement to review their current retirement planning activity compared to last year before the pandemic began. These near-retirees are more active in pursuing a variety of strategies, including:
- Saving enough in a retirement account (29% versus 23% in 2020);
- Diversifying their retirement savings (42% versus 27% in 2020); researching expenses and risks associated with retirement (43% versus 35% in 2020);
- Making a formal plan with a financial professional (37% versus 29% in 2020); and
- Purchasing a product that provides a guaranteed source of retirement income (38% versus 30% in 2020).
“Black swan events like this global pandemic are often the trigger that convinces people they need to take a more proactive approach to managing risks that may come in retirement,” LaVigne concluded. “In that respect, it is encouraging to see that many Americans are taking this as a wake-up call and adding more risk management measures, including sources of guaranteed and supplemental retirement income, into their retirement planning process.”