Pop quiz, hotshot: What is the No. 1 fear of Americans facing retirement. Give yourself a gold star if you answered, “Social Security running out in my lifetime.”
While “outliving my savings” is commonly cited as that biggest fear, the end of Social Security is actually the biggest fear, according to the latest iteration of the SimplyWise Retirement Confidence Index, just as it has been for each previous version of the index.
The bi-monthly SimplyWise Retirement Confidence Index, running since May 2020, tracks evolving American confidence around savings and retirement. The latest index polled 1,029 citizens ages 18+ between January 8-10, 2021.
For people not yet claiming Social Security benefits, financial concerns remain among the highest anxieties in thinking about retirement.
The January Index found that for those not yet claiming Social Security retirement benefits, 53% fear those benefits will dry up. That anxiety was most acute for people in their 50s, nearest to their legal retiring age. Of that group, 58% worry about Social Security drying up during their lifetime.
For this reason, many believe they will be working for their whole lives. In fact, the January Index saw that more people than ever today worry they will never be able to retire. For those not yet claiming Social Security retirement, 44% worry they won’t ever retire.
Interestingly, when the same question was asked to Americans in their 50s as well as seniors (age 60+), the numbers had also increased. While the previous SimplyWise surveys found approximately one in three in their 50s worry about not being able to retire, the January poll found that 42% have this worry. Perhaps worse, for seniors, many of whom are already retired from work, a total 18% believe they never will retire. That is almost one in five American seniors who fear they may have to work for the rest of their life.
Outliving savings a major concern
The January survey found that other major retirement concerns for Americans not yet collecting Social Security retirement benefits were specifically around savings and expenses. The January 2021 Index found that 49% worry they will outlive their savings, and 42% worry about covering daily living expenses when they retire. Another 47% are concerned about their ability to cover medical bills in retirement. And for people in their 50s, 53% worry about paying medical bills in retirement—an Index-high.
Given this current climate, 9% of people in their 50s and 60s are now considering retiring earlier than planned. Many of them will be claiming their Social Security benefits earlier than expected. Of course, claiming benefits before retirement age permanently reduces what you could receive monthly from Social Security. In fact, the January Index found that 10% of people in their 50s and 60s are now considering claiming Social Security benefits early.
Retirement confidence remains low
The SimplyWise Index has found since its inception that retirement confidence remains low. But is there light at the end of the tunnel? The January Index found that 55% of people are more concerned about retirement today than this time last year. This is compared to last year’s 56% in May, 62% in July, 58% in September, and 59% in November.
That means that concern over retirement, as expressed by the survey findings, is now at the lowest point since the pandemic began. These results reflect a somewhat more optimistic view of the future. While a majority of Americans do continue to feel financially squeezed today, as 2021 begins, many appear to have a brighter outlook.
While concerns over retirement finances and savings remain high, the SimplyWise Index shows they vary considerably across income, race, gender, and even political party.
The January Index found that Black Americans continue to be the most concerned about retirement; 59% reported they are more concerned about their retirement prospects today compared to this time last year. That is compared to 57% of Hispanic Americans and 54% of White and Asian Americans who said they are more concerned.
By income bracket, the index found that 58% of Americans with a household income of $50,000 or less are more concerned about retirement today compared to this time last year. This is compared to just 40% of Americans with a household income of $150,000 or above who are more concerned about retirement today.
Retirement saving takes backseat during pandemic
In line with the previous surveys, the January Index found that 32% of Americans saved $0 for retirement in the last year. That means that almost one third of Americans saved nothing for retirement in 2020.
The index also found that 23% of Americans don’t have any retirement plan at all.
There was a gender divide in the January results. Again, men saved more than women across the board. For example, 63% of men vs. 47% of women saved $500 or more for retirement in the last year. Moreover, just 26% of men saved $0 for retirement in 2020, compared to 36% of women.
There was also a disparity when it came to those who have been laid off or furloughed due to COVID-19. Of that group, 45% saved $0 for retirement in 2020.
Interestingly, when narrowing in on savings of the 50-59 age group, the results looked similar to that of the average American. In fact, 31% of people in their 50s saved nothing for retirement in 2020. And 45% saved under $1,000 for retirement over the year.
There is a bright spot. Across the board, Americans do feel more determined to improve their savings in the new year. In fact, 54% of the country said they plan to save more for retirement in 2021. Of people in their 50s, 55% plan to save more for retirement this year.
CARES Act withdrawals
It appears many Americans are not able or willing to pay back the CARES Act-enabled withdrawn funds into their retirement accounts.
In fact, the January Index found that of people who took the CARES Act withdrawal from their retirement plan in 2020, 43% do not plan to pay it back (57% do plan to pay it back). Of people laid off due to COVID-19 who took a CARES Act withdrawal, 52% are not planning to pay it back.
Congress did not extend this 2020 policy, so Americans are no longer able to withdraw penalty-free from these accounts in 2021. However, the January Index did find that 21% of Americans are still planning to withdraw from their 401k during 2021, despite the return of the withdrawal penalty. That would appear to be a move out of desperation they may see as their only choice due to dire circumstances.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
